Q4 2021 Piedmont Office Realty Trust Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust fourth quarter 2021 earnings call at.

Good morning ladies and gentlemen and welcome to the Piedmont office Realty Trust fourth quarter 2021 earnings call. At this time all participants have been placed on a listen only mode and we will open up the floor for questions and comments after the presentation.

At this time, all participants have been placed on a listen only mode.

Open up the floor for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host Eddie Gilbert Sir the floor is yours.

It is now my pleasure to turn the floor over to your host, Eddy Gilbert. Sir, the floor is yours.

Thank you operator, and good morning, everyone. We appreciate you joining us today for Piedmont's fourth quarter 2021 earnings Conference call last night, we filed an 8-K that includes our earnings release and our unaudited supplemental information for the fourth quarter. That's available on our website at Piedmont REIT Dot com under the Investor Relations section.

Thank you operator and good morning everyone. We appreciate you joining us today for Piedmont's fourth quarter 2021 earnings conference call. Last night we filed an 8K that includes our earnings release and our unaudited supplemental information for the fourth quarter that's available on our website at piedmontreed.com under the investor relations section.

During this call, you'll hear from senior officers at Piedmont and they may refer to certain non-GAAP financial measures such as FFO, Core FFO, AFFO, and same store NOI. The definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information.

During this call you'll hear from senior officers at Piedmont, and they may refer to certain non-GAAP financial measures such as <unk> core <unk> <unk> and same store NOI the.

The definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information.

Also on today's call the company's prepared remarks and answers to your questions will contain forward looking statements as defined in the private Securities Litigation Reform Act of 1095.

Also on today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements address matters which are subject to risks and uncertainties, and therefore actual results may differ from those we anticipate and discuss today.

Forward looking statements address matters, which are subject to risks and uncertainties and therefore actual results may differ from those we anticipate and discuss today.

The risks and uncertainties of these forward-looking statements are discussed and are press release as well as in our SEC file.

The risks and uncertainties. These forward looking statements are discussed in our press release as well as in our SEC filings.

We encourage everyone to review the more detailed discussions related to risks associated with forward looking statements in our SEC filings. Examples of forward looking statements include those related to Piedmont future revenues and operating income dividends.

We encourage everyone to review the more detailed discussions related to risks associated with four-looking statements in RSCC filings. Examples of four-looking statements include those related to Piedmont's feature revenues and operating income, dividends, and financial guidance.

Dividends and financial guidance.

Future leasing and investment activity and the impacts of this activity on the company's financial and operational results. You should not place any undue reliance on any of these four looking statements in the statement speak as of the day they are made.

Future leasing and investment activity and the impacts of this activity on the company's financial and operational results you should not place any undue reliance on any of these forward looking statements and these statements speak.

As of the date they are made.

At this time, our president and Chief Executive Officer, Brent Smith.

At this time, our president and chief executive officer, Brent Smith, will provide some opening comments and discuss our fourth quarter and annual results in accomplishments.

<unk> will provide some opening comments and discuss our fourth quarter and annual results and accomplishments Brent.

Brent.

Good morning everyone and thank you again for joining us on today's call as we review our financial and operating results for the fourth quarter of 2021 and for the year.

Good morning, everyone and thank you again for joining us on today's call as we review our financial and operating results for the fourth quarter of 2021 and for the year on.

On the line with me is Eddie Gilbert, our executive vice president of Finance and Treasurer, towards Wells, our chief operating officer, and Bobby Bowers, a chief financial officer, as well as other members of the senior management team.

On the line with me as Eddie Guilbert, our executive Vice President of Finance and Treasurer, George Wells, Our Chief operating Officer, and Bobby Bowers, Chief Financial Officer, as well as other members of the senior management team.

Before we begin today's call, I want to take a moment and thank my talented, hardworking team members who deliver first class service to Piedmont customers 24-7, 365 days a year. Their tireless dedication continues to garner industry honors for operational excellence and sustainability, including our recognition as a 2021 Energy Star partner of the year and achieving lead status now on roughly half the portfolio.

Before we begin today's call I want to take a moment and thank my talented hardworking team members, who deliver first class service to <unk> customers $24 seven 365 days a year their tireless dedication continues to garner industry honors for operational excellence and sustainability, including our recognition of the two.

'twenty, one energy star partner of the year and achieving lead status now in roughly half the portfolio.

Today, I am going to cover piedmont's operational success in leasing momentum along with an update on capital allocation activities across our markets.

Today I'm going to cover PMOT's operational success in leasing momentum, along with an update on capital allocation activities across our markets.

Focusing on the fourth quarter of 2021, our <unk> per share was <unk> 51.

focusing on the fourth quarter of 2021, our FFO per share was 51 cents in line with market consensus.

In line with market consensus.

Portfolio operating metrics were solid, with same store NOI on a cash basis, increasing 5.8%.

Portfolio operating metrics were solid with same store NOI on a cash basis, and creating increasing five 8%.

We leased approximately 400,000 square feet, generated a 3% increase in second generation cash rents, and executed an average lease term of

We leased approximately 400000 square feet generated a 3% increase in second generation cash rents.

And executed an average lease term of six five years.

illustrating the longer term view taken by most our customers. Most notably, about half of the fourth quarter's leasing was related to new tenants. Making this the second consecutive quarter, PMON has achieved pre-pandemic levels of new lease.

<unk> the longer term view taken by most of our customers.

Notably about half of the fourth quarter's leasing was related to new tenants, making this the second consecutive quarter Piedmont achieved pre pandemic levels of new leasing.

Overall leasing activity remained robust and well dispersed across the portfolio.

Overall, leasing activity remained robust and well dispersed across the portfolio with over 40 leases and amendments executed during the fourth quarter. And while the Oma Cron variant had a modestly negative impact on building utilization during December and January , the leasing pipeline has not dissipated and we expect the momentum from the second half of 2021 to continue.

Over 40 leases and amendments executed during the fourth quarter.

And while the omicron very had a modestly negative impact on building utilization during December and January the leasing pipeline has not dissipated and we expect the momentum from the second half of 2021 to continue today.

Today our leasing pipeline stands at over 500,000 square feet in negotiations and we're trading L.O.I.s on an additional 1 million square feet which positions speed mods for space absorption in 2022. And with only about a million square feet of existing leases expiring or about 6% of the portfolio.

Today, our leasing pipeline stands at over 500000 square feet in negotiations and we're trading LOI on an additional 1 million square feet, which positions Piedmont for space absorption in 2022.

And with only about 1 million square feet of existing leases expiring or about 6% of the portfolio.

Boston, Dallas, and Atlanta remain our most active leasing markets, albeit for different reasons. The Boston market continues to exhibit strong fundamentals led by business migration to the suburbs and reduce competitive class A office stock as the in-statiable demand from life science users continues to drive office to lab conversions.

Boston, Dallas, and Atlanta remain our most active leasing markets, albeit for different reasons.

Boston market continues to exhibit strong fundamentals led by business migration to the suburbs and reduced competitive class a office stock is the insatiable demand from life Science users continues to drive office to lab conversions for.

For example, during the past year in our Burlington Sun market, three competitive class A buildings comprising over 400,000 square feet have been repurposed to lab, helping to push net effective rents for office space to pre-pandemic levels.

For example, during the past year in our Burlington Submarket three competitive class a buildings comprising over 400000 square feet have been repurposed to labs, helping to push net effective rents for office space to pre pandemic levels.

And in Dallas and Atlanta are two largest markets. We continue to see an increasing number of corporate relocations resulting in meaningful job growth.

And in Dallas, and Atlanta are two largest markets. We continue to see an increasing number of corporate relocations, resulting in meaningful job growth.

As an example, during the fourth quarter, we signed a 55,000 square foot lease at our connection drive property in Dallas to serve as the new corporate headquarters of an undisclosed Fortune 500 company.

As an example during the fourth quarter, we signed a 55000 square foot lease at our connection drive property in Dallas to serve as the new corporate headquarters of an undisclosed Fortune 500 company.

And in that same market during the second quarter, we signed a 44000 square foot lease to serve as the corporate headquarters for large national beverage distributor.

And in that same market during the second quarter, we signed a 44,000 square foot lease to serve as the corporate headquarters for large national beverage distributor.

In both these markets, rinse at our properties are now above pre-pandemic levels. However, net effective rinse are approximately 2% to 5% lower. I would note, a customer-fliced quality is well underway, which is driving wider rinse disparities between place-making versus commodity office product. For example, JL Research noted that 84% of Atlantea's activity in the fourth quarter was in Class A or trophy product.

In both these markets rents at our properties are now above pre pandemic levels. However, net effective rents are approximately 2% to 5% lower.

I would note a customer flight to quality is well underway, which is driving wider rent disparities between place making versus commodity office product. For example, gel research noted that 84% of Atlanta leasing activity in the fourth quarter was in class a trophy product.

Orlando also continues to perform well with leasing and tour activity across all five of our downtown properties at pre-pandemic levels.

Orlando also continues to perform well with leasing and tour activity across all five of our downtown properties at pre pandemic levels.

The downtown sub market continues to experience population inflows, particularly for the millennial and Gen Z cohorts driven by highly walkable environment with expanding retail food and beverage options, along with entertainment and many amenities surrounding the university of Central Florida as creative village campus.

The downtown sub-market continues experience, population inflows, particularly for the Millennial and Gen Z cohorts, driven by a highly walkable environment with expanding retail, food and beverage options, along with entertainment amenities surrounding the University of Central Florida's Creative Village Campus, Amway, Center Arena, and Camping World Stadium, along with a uniquely urban Lake Eola.

Center Arena and camping World Stadium, along with a uniquely urban Lake ULA.

In Orlando, net effective rinse are still trailing pre-pandemic levels by about 5% as a result of increased concession.

In Orlando net effective rents are still trailing prepaying demick levels by about 5% as a result of increased concessions.

Finally, Minneapolis the district in Washington, D C and New York City, all experiencing increasing tour activity, however, leasing velocity and tenant demand still lag our sunbelt markets.

Finally, Minneapolis, the District and Washington DC, and New York City are all experiencing increasing tour activity. However, leasing velocity and tuning demand still lag our Sunbelt Markets.

I would add, we are fortunate to have limited vacancy and near-term leaf expressions that are 60 broad street property in Lower Manhattan and virtually no expressions that are washed in DC properties for more than two years.

I would add we are fortunate to have limited vacancy and near term lease expirations at our 60 broad Street property in lower Manhattan, and virtually no expirations at our Washington, DC properties for more than two years.

Leaking across all our core markets contributed to the fourth quarter's total.

Leasing across all our core markets contributed to the fourth quarter's totals.

and our customer CEO and HR dialogue continues to show our portfolio's position to gain market share. Users of Office space are undertaking a flight to quality that focuses on new or newly renovated office buildings with unique environments and a vast set of amenities, owned and operated by responsive, sustainability-minded, service-oriented landlords. And because of these demand drivers, PMAX portfolio's well-positioned

And our customers CEO and HR dialogue continues to show our portfolio is positioned to gain market share users of office space are undertaking a flight to quality that focuses on new or newly renovated office buildings with unique environments and a vast set of amenities owned and operated by responsive sustainability minded service oriented landlord.

And because of these demand drivers piedmont's portfolio is well positioned supported by concentration of newly renovated well and monetized buildings located in your housing communities and highly regarded education systems with easy accessibility to major highway thoroughfares in airports, but today as tenants are not only focused solely on location and navy.

supported by a concentration of newly renovated, well-eminentized buildings located near housing communities and highly regarded education.

With easy accessibility to major highway throwfares and airpods.

But today's tenants are not only focused solely on location and neighboring amenities, but the physical attributes of a building have never been more important. The building's indoor air and light, HVAC, fresh air intake, elevator capacity, and outdoor collaboration space are all critical.

Entities, the physical attributes of a building has never been more important.

Building enduring Aaron light HVA C fresh air intake elevated capacity and outdoor flavor collaboration space are all critical.

In addition to high quality building and a vibrant environment customers are demanding a higher quality landlord as well and by that we mean in a tentative operator that focuses on our sustainability initiatives and which has the capital base and scale to provide tender offerings and engagement office space is no longer just a real estate product.

In addition to high quality building and a vibrant environment, customers are demanding a higher quality landlord as well. And by that, we meet an attentive operator that focuses on a sustainability initiatives, in which has a capital base and scale to provide to the offerings and engagement. Office space is no longer just a real estate product.

Taking a look back at the operational highlights for the 2021 fiscal year Piedmont leased almost $2 3 million square feet, which was in line with our average pre COVID-19 annual leasing levels.

Taking a look back at the operational highlights for the 2021 fiscal year, PIMOT leased almost 2.3 million square feet, which was in line with our average pre-COVID annual leasing level.

In addition, the increase in second generation cash rents was 7.5%, which helped increase same-store cash in a life of the year by almost 7%.

In addition, the increase in second generation cash rents was seven 5%, which helped increase same store cash NOI for the year by almost 7%.

And finally, our tenant retention ratio was in line with prior years at approximately 70%.

And finally, our tenant retention ratio was in line with prior years at approximately 70%.

Recovery and leasing activity bolsters our optimism for the rebound of the office sector, and particularly for landlords such as ourselves who offer high quality, modernized, sustainability focused, and mini-rich environments. Looking ahead, approximately 750,000 square feet of chin at leasing has yet to commence as of this year end, or is in some form of a...

Recovery and leasing activity bolsters, our optimism for the rebound of the office sector, and particularly for landlords such as ourselves who offer high quality modernized sustainability focused amenity rich environment. Looking ahead, approximately 750000 square feet of tenant leasing has yet to commence as of this year end.

Or is it some form of abatement.

This backlog creates organic growth opportunities going into 2022, associated with approximately 26 million in future annualized cash rents.

This backlog creates organic growth opportunities going into 2022 associated with approximately $26 million in future annualized cash rent.

In addition, approximately 60% of the portfolio is vacancy, and 85% of 2022 lease expiration reside in our Sunbelt properties. We are experiencing the greatest level of leasing the loss.

In addition, approximately 60% of the portfolio is vacancy and 85% of 2022 lease expirations resided in our sunbelt properties, where we are experiencing the greatest level of leasing velocity.

A schedule that larger upcoming lease commitments and abatements is included in our supplemental financial information, which was followed last night.

Our schedule of the larger upcoming lease Commencements and abatements is included in our supplemental financial information, which was filed last night.

Pivoting now to capital allocation activities. Despite the disruption from the pandemic and more recently the omicron variance. The office investment sales market has continued to unfold. We are currently in discussions on a pipeline of over $1 billion of high quality assets, primarily for properties in our sunbelt markets.

Despite the disruption from the pandemic, and more recently, the Omicron variant, the Office Investment Sales Market has continued to unfold. We are currently in discussions on a pipeline of over $1 billion of high quality assets, primarily for properties in our Sunbelt Market.

Furthermore, we are encouraged to hear several targeted buildings that will be coming to market in the first half of 2022.

Furthermore, we are encouraged to hear of several targeted buildings that will be coming to market in the first half of 2022.

Our principal and broker dialogue suggests insurance companies, pension funds, and other private market participants are planning to reduce their office sector exposure in the near term. And currently, well-leased Sunbelt Office with more than seven years of weight-average lease term is among the most liquid type of property in the asset class.

Our principal and broker dialogue suggests insurance companies pension funds and other private market participants are planning to reduce their office sector exposure in the near term and currently well leased Sunbelt office with more than seven years of weighted average lease term is among the most liquid type of property in the asset class.

The increase in transactional activity is encouraging, given Piedmont's tragedy to recycle capital strategically as an additional driver for our earnings growth.

The increase in transactional activity is encouraging given piedmont's strategy to recycle capital strategically.

As an additional driver for our earnings growth.

And finally, I would note that cap rates remain steady for high quality assets, with limited lease roll over, and particularly those that are highly miniatized and that can compete with new construction.

Finally, I would note that cap rates remained steady for high quality assets with limited lease rollover and particularly those that are highly monetized and it can compete with new construction.

While the investment sales market has improved, construction starts have slowed dramatically due to the uncertainty created by the pandemic. A positive for the continued office market recovery would supply chain constraints to construction of new product when I'll take two and a half to three years to be delivered. In addition, new construction costs are escalated by 15 to 20% versus pre-pandemic pricing. Driven by an increase in both raw materials and labor.

While the investment sales market has improved construction starts have slowed dramatically due to the uncertainty created by the pandemic are positive for the continued office market recovery.

We supply chain constrains the construction of new product will now take two five to three years to be delivered in addition, new construction costs have escalated by 15% to 20% versus pre pandemic pricing driven by an increase in both raw materials and labor.

In this capital environment, Pee Mutt continues to focus on a redevelopment opportunities where cost and timelines can be more easily manned.

In this capital environment Piedmont continues to focus on our redevelopment opportunities where cost and timelines can be more easily managed.

In 2021, we completed over $50 million of incremental investment in our properties. Upgrading assets to remain best in class within their respective sub-mark.

In 2021, we completed over $50 million of incremental investment in our properties upgrading assets to remain best in class within their respective submarkets.

That said, we continue to have dialogue with a number of clients regarding pre-leasing for ground up development. Focusing on Peemont's investment activities, during the quarter we expanded our land on market footprint with the acquisition of 999 P-stree Street. And subsequent to quarter in, I am pleased that we closed in a disposition of a Raytheon asset, as well as our accelerated our plan to exit from the Chicago market.

That said, we continue to have dialogue with a number of clients regarding pre leasing for ground up development.

Focusing on Piedmont investment activities during the quarter, we expanded our Atlanta market footprint with the acquisition of 999 Peachtree Street and subsequent to quarter end I am pleased that we closed on the disposition of a raytheon asset as well as our accelerated our planned exit from the Chicago market.

As you all know, the 999 acquisition marks our entry into Midtown Atlanta sub market. The iconic Class A lead platinum 28 story building is 622,000 square feet with 77% lease at acquisition.

As you all know the 999 acquisition marks our entry into Midtown Atlanta Submarket.

Connick class a LEED platinum 28 story building is 622000 square feet with 77% leased at acquisition.

We purchased it for $360 a square foot, which we estimated is over 40% below replacement cost.

We purchased it for $360 a square foot, which we estimate is over 40% below replacement cost.

We're working with Gensler, a tenant at the building.

We're working with Gensler, a tenant at the building, to complete the redesign of the 999s, arrival experience in public spaces, including a modernized and expanded lobby, energized outdoor space, and other enhanced to many, which will complete over the next 12 to 18 months. And we'll revitalize this asset in a fraction of the time and cost of new construction.

To complete the redesign of 990 nine's arrival experience in public spaces, including a modernized and expanded lobby energized outdoor space and other enhanced many which will complete over the next 12 to 18 months.

<unk> revitalized this asset in a fraction of the time and cost of new construction.

With a 10 foot glass window line across 70% of the facade, this asset will effectively compete against new construction at a fraction of the cost with an expected all-in basis in a low $400 per square foot, versus new product consisting of costing an excess of $650 per square foot. Creating substantial pricing leverage for our building when compared to that new development.

With a 10 foot glass window line across 70% of the facade. This asset will effectively compete against new construction at a fraction of the cost with an expected all in basis in the low $400 per square foot versus new product consist costing in excess of $650 per square foot, creating substantial pricing leverage for our building when compared to that new.

Development.

The 224 million dollar acquisition of $9.99 is being funded through multiple dispositions.

The $224 million acquisition of <unk> 99 is being funded through multiple dispositions.

Immediately after quarter in the disposition of 225 and 235 presidential way in Boston closed in a reverse 1031 exchange for $129 million or a mid-Fives cap race.

After quarter end, the disposition of $2 25, and $2 35 presidential way in Boston closed in a reverse 10, 31 exchange for $129 million or a mid fives cap rate.

Also, the Sub-Squint to Quarter-In, we negotiated an agreement to sell and have closed on two Pierce Place, our last remaining asset in the Chicago area. And we anticipate more non-core asset proceeds in the first half of 2022.

Also subsequent to quarter end, we negotiated an agreement to sell and have closed on two Pierce place our last remaining asset in the Chicago area and.

We'd anticipate more noncore asset proceeds in the first half of 2022.

The acquisition of 999 Peachtree Street during the fourth quarter as well as the completion of two noncore dispositions just after the quarter end now makes it land our largest market based on annualized lease revenue.

The acquisition of 999 Peach Tree Street during the fourth quarter, as well as the completion of two non-core dispositions just after the quarter end, now makes Atlanta our largest market based on annualized lease revenues.

Adjusting our least percentage for the disposition transactions, our pro forma least percentage as of December 31st would have been 87%.

Adjusting our lease percentage for the disposition transactions, our pro forma lease percentage as of December 31 would have been 87%.

Additionally, approximately 63% of our annualized lease revenue is now generated from our Sunbelt Properties, and our goal is to have 70 to 75% of our ALR generated by our Sunbelt markets before the end of 2023. We believe a goal that's attainable given the investment sales market activity we see today.

Additionally, approximately 63% of our annualized lease revenue is now generated from our sunbelt properties and our goal is to have 70% to 75% of our ALR generated by our sunbelt markets before the end of 2023, we believe a goal thats attainable given the investment sales market activity, we see today.

Finally, I want to thank those investors who attended the recent property tour in December at our Midtown Atlanta and gallery of properties.

Finally, I want to thank those investors who attended the recent property tour in December at our Midtown Atlanta and Galleria properties. Myself and the team were extremely grateful to be able to share some of our most recent redevelopment projects.

Myself and the team we are extremely grateful to be able to share some of our most recent redevelopment projects.

With that I'll turn it over to Bobby to walk you through the financial highlights of the quarter and guidance for 2020 to Bobby.

With that, I'll turn it over to Bobby to walk you through the financial highlights of the quarter and guidance for 2022. Bobby.

Bobby.

Thanks, Brent. While I'll discuss some of our financial highlights for the quarter, I encourage you to please review the entire earnings release and supplemental financial information, which were five last night, for more complete details.

Thanks, Brent while I'll discuss some of our financial highlights for the quarter.

Average you to please review the entire earnings release, and supplemental financial information, which were filed last night for more complete details.

Looking back on 2021, CoreFIFO for the year was $1.97 per diluted share, a 4% increase over 2020, and an excess of the upper end of our original guidance range for the year.

Looking back on 2021 core <unk> for the year was $1 97 per diluted share a 4% increase over 2020 and in excess of the upper end of our original guidance range for the year.

This growth in Corapefo overcame an approximately 1% reduction in our overall lease percentage on a year-over-year base.

This growth in core <unk> overcame approximately 1% reduction in our overall lease percentage on a year over year basis.

The decrease in occupancy was driven by several factors, reduced leasing activity during 2020 in the first half of 2021 as a result of the pandemic.

The decrease in occupancy was driven by several factors reduced leasing activity during 2020 in the first half of 2021 as a result of the pandemic.

a number of sizable lease explorations that recently acquired properties in Atlanta and Dallas that were underwritten as part of their respective acquisition.

A number of sizable lease explorations recently acquired properties in Atlanta, and Dallas that were underwritten as part of their respective acquisitions.

in the purchase of the 77% lease 999 Peachtree Street Proper.

And the purchase of the 77% leased.

Peachtree Street property.

After incorporating the just completed disposition activity in January of 2022, our performance at least percentage as of December 31 would have been 87%.

After incorporating the just completed disposition activity in January of 2022, our pro forma lease percentage as of December 31 would have been 87%.

We reported 51 per diluted share of core <unk> for the quarter.

We reported 51 cents per diluted share of CoreFFO for the quarter.

That's an 11% increase over the fourth quarter of 2020.

That's an 11% increase over the fourth quarter of 2020.

This increase is primarily due to a creative recycling activity and rising rental rates.

This increase is primarily due to accretive recycling activity and rising rental rates are.

Our COREFFO achievement during the fourth quarter also reflects the repurchase of approximately 1 million shares of our common stock at an average price of $17.76 per share during the quarter. Leaving approximately 150 million in board authorized capacity under our share repurchase program.

<unk> achievements during the fourth quarter also reflects the repurchase of approximately 1 million shares of our common stock at an average price of $17 76.

Per share during the quarter, leaving approximately $150 million board authorized capacity under our share repurchase program.

Core <unk> as you know excludes gains and losses impairments on real estate as well as excluding depreciation and amortization.

Now CoreFFO, as you know, excludes gains, losses, impairments on real estate as well as, excluding depreciation and amortization. And I do want to discuss this real estate activity during the fourth quarter of 2021.

And I do want to discuss this real estate activity during the fourth quarter of 2021.

While we had originally intended to lease up two pairs of place before this position.

While we had originally intended to lease up two pierce place before disposition.

We received an un-celicit offer to purchase the asset during the fourth quarter.

Saved an unsolicited offer to purchase the asset during the fourth quarter.

given the fact that we have no other Chicago holdings we made the decision to accept the offer if the purchase could be negotiated and closed quickly thereafter

Given the fact that we have no other Chicago holdings, we made the decision to accept the offer if the purchase could be negotiated and closed quickly thereafter.

As is often the case gap typically dictates early recognition of potential losses.

as it's often the case, scalp typically dis-pictates early recognition of potential loss.

and the decisions that shorten the whole period for this asset did result in the recognition of a $41 million in paramount charge that is included in our fourth quarter results of operation.

The decision to shorten the whole period for this asset did result in the recognition of a $41 million impairment charge that is included in our fourth quarter results of operations.

Now on the flip side, the sale of $2.25 to $35 presidential way will result in the recognition of an estimated $50 million dollar gain during the first quarter of 2022 when the sale also broke down with

On the flip side the sale of $2 25 to 35 presidential way will result in the recognition of an estimated $50 million gain during the first quarter of 2022, when the sale closed.

AFFO generated during the fourth quarter was approximately $39 million, which is well above our current $26 million quarterly dividend level.

<unk> generated during the fourth quarter was approximately $39 million, which is well above our current $26 million quarterly dividend level.

Our board has indicated that given our cash unawagwrote over the last few years.

Our board has indicated that given our cash NOI growth over the last few years.

In fact, we're approaching the conclusion of the large construction restacking project for the state of New York at 60 broad.

The fact that we are approaching the conclusion of the large construction re stacking project for the state of New York at 60 broad.

The time since our last dividend increase, they will be reviewing our dividend payout amount during 2022.

And the time since our last dividend increase they will be reviewing our dividend payout amount during 2022.

Turning to the balance sheet, I expect more attention will be focused now on corporate financial positions given the rising interest rate environment, including the amount of floating rate debt, upcoming maturity.

Turning to the balance sheet I expect more attention will be focused now on corporate financial positions given the rising interest rate environment include.

Including the amount of floating rate debt.

Upcoming maturities and overall leverage.

Our annual debt, net debt to Court E. Wadau ratio, as of the end of the fourth quarter of 2021, was 5.7 times.

Our annual debt net debt to core EBITDA ratio as of the end of the fourth quarter 2021 was five seven times and we reported $210 million of unused capacity on our line of credit.

And we reported 210 million of unused capacity on our line of credit.

Taking into consideration the completed disposition activity occurring right after year end.

Taking into consideration the completed disposition activity occurring right after your end.

With the net sales proceeds received in January , our current available capacity on our $500 million line of credit is approximately $320 million.

With the net sales proceeds received in January our.

Our current available capacity on our $500 million line of credit is approximately $320 million.

With an approximate $120 million more expected later this quarter from the payoff of a note receivable.

Addressing.

For the application of proceeds from the two closed January sales.

for the application of proceeds from the two closed January sales.

Our performance debt to gross asset ratio at year end would have been approximately 35%.

Our pro forma debt to gross asset ratio at year end would've been approximately 35% we.

We have no secured debt currently on our books, and we have no scheduled debt maturities in 2022 other than our revolver, which we currently intend to renew long term later this year, rather than exercise a line short-term extension of.

We have no secured debt currently on our books and we have no scheduled debt maturities in 2022 other than our revolver, which we currently intend to renew long term later this year rather than exercise aligns short term extension options.

Finally.

Finally, we're introducing 2022 annual financial guidance for CoreFFO in the range of $1.97 to $2.7 per diluted cheer.

We're introducing 2022 annual financial guidance for core <unk> in the range of $1 97 to $2 seven per diluted share.

This guidance assumes that gradual increase in physical utilization of our buildings by our tenants over the course of the year to a level near pre-cold utilization by the end of the calendar year.

This guidance assumes a gradual increase in physical utilization of our buildings by our tenants over the course of the year to a level near pre coke utilization by the end of the calendar year.

It also assumes a neutral amount of asset recycling during the year with about $350 million to $450 million each of acquisitions and additional dispositions.

It also assumes a neutral amount of acid recycling during the year with about 350 to 450 million each of acquisitions and additional dispositions.

This net neutral activity excludes the recently completed sales of the presidential way assets.

This net neutral activity excludes the recently completed sales of the President's Hawaii assets.

and two-pairs' place property that were used to fund the 999 P. Street Street acquisition.

And two Pierce place property that were used to fund the 999 Peachtree Street acquisition.

We will provide revised guidance as each significant acquisition or disposition is completed this year.

We will provide revised guidance as each significant acquisition or disposition is completed this year.

The guidance assumes general and administrative expenses in the range of $29 million to $31 million for the year.

The guidance assumes general and administrative expenses in the range of $29 to $31 million for the year.

Our same store cash in a lot of growth is expected to be flat for the year with a number of abatements occurring during 2022 due to the lease renewals and newly commencing leases such as 160,000 square foot renewal at 1155 perimeter center west in Atlanta and a 56,000 square foot lease at 400 Virginia in Washington DC.

Our same store cash NOI growth is expected to be flat for the year with a number of abatements occurring during 2022 due to the lease renewals and newly commencing leases such as the 160000 square foot renewal at $11 55 perimeter center West in Atlanta.

And a 56000 square foot lease at 400, Virginia.

Washington D C.

as well as down times between leases associated with new tenant buildouts such as a 67,000 square foot lease at five and fifteen waste-side in Boston and a 44,000 square foot lease at one Lincoln in Dallas.

As well as downtime between leases associated with new tenant build outs, such as a 67000 square foot lease at five and 15 wayside in Boston and a 44000 square foot lease at one Lincoln in Dallas.

A cruel, based, or analyzed expected to grow from 1 to 3% during the year. I will remind you that these estimates will ultimately be dependent upon the transaction activity achieved during the year, since such properties will be excluded at year end from the same store to your comparison.

Accrual based or NOI is expected to grow from 1% to 3% during the year.

I'll remind you that these estimates will ultimately be dependent upon the transactional activity achieved during the year since such properties will be excluded at year end from the same store two year comparisons.

Likewise, our lease percentage is expected to grow to approximately 88%.

Likewise, our lease percentage is expected to grow to approximately 88%. But again, this estimate is subject to the lease percentages of the properties involved with a 350 to 450 million of potential recycling transactions completed during the year.

But again this estimate is subject to the lease percentages of the properties involved with the $350 million to $450 million of potential recycling transactions completed during the year.

Our forecast also assumes there will be three to four interest rate hikes during 2022 that will impact interest expense negatively versus recent prior years. And finally, we are assuming a dividend adjustment around mid-year and it is not expected to impact our overall financial results.

Our forecast also assumes there'll be three to four interest rate hikes during 2022 that will impact interest expense negatively versus <unk>.

Recent prior years.

Finally, we are assuming a dividend adjustment around midyear and it is not expected to impact our overall financial results.

With that, I'll now ask our conference call operator provide our listeners with instructions on how they can submit their questions. We'll attempt to answer all of your questions now or we'll make appropriate later public disclosure if necessary. Operator.

With that I'll now ask our conference call operator to provide our listeners with instructions on how they can submit their questions. We'll attempt to answer all of your questions now.

We will make appropriate later public disclosure if necessary.

Operator.

Ladies and gentlemen, the floor is now open for questions.

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Have any questions or comments. Please press star one on your phone at this time.

ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we...

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Yes.

Your first question for today is coming from Anthony Palon. Please announce your affiliation, then pose your question.

Your first question for today is coming from Anthony Powell loan. Please announce your affiliation then pose your question.

Thanks JP Morgan. Bobby, I think I may just miss this because jotting some things down the loan investments. Did you say those were getting repaid or over the details on those?

Thanks, J P Morgan.

Bobby I think I may have just missed this because driving some things down the loan investments did you did you say those were getting repaid or where the details on this.

Hey Tony, I hope you're doing okay. Yeah, the note receivable, we're expecting to be paid off based on discussions with them. You might remember that originated back last year with the cell of some properties in New Jersey, but we do expect it to be paid off in the first quarter.

Hey, Tony I Hope Youre doing okay, yes. The note receivable, we're expecting to be paid off based on discussions with them you might remember that originated back last year with the sale of some.

Some properties in New Jersey, but.

But we do expect it to be paid off in the first quarter.

I got it. And then with regards to the capital recycling this year, you mentioned the neutral acquisitions and dispositions. It's not like that was from like a dollar volume point of view. Can you talk to spreads and what you think happens on that front?

Okay got it.

And then.

With regards to the capital recycling. This year you mentioned the neutral.

Acquisitions and dispositions it sounded like that was up from like a dollar volume point of view can you talk to spreads and what you think happens on that front.

Hi Tony, it's Brent. Thanks for joining us this morning. In regards to spread, I think it obviously depends on the opportunity that we're looking at and while there does seem to be either some good off-market dialogue that we're currently having or as I alluded to, my prepared remarks, an opportunity for some brokerage assets that we've been looking at for some time in our market.

Hi, Toni it's Brent Thanks for joining us this morning in regards to spreads I think.

Obviously depends on the opportunity that we're looking at and while there does seem to be either.

Some good off market dialog that we're currently having are as I alluded to in my prepared remarks, a opportunity for some brokered assets that we've been looking at for some time in our markets.

primarily again Boston, Atlanta or Lando and Dallas.

Primarily again, Boston, Atlanta, Orlando and Dallas.

And so we continue to remain very enthusiastic about continuing to recycle. Historically, as you've mentioned or kind of alluded to, we've been able to do that creatively, probably to the tune of 150 basis points to 200 basis points. Some of it, some of it through value creation over a couple of years. An example of that being 999, where we're gonna do some pretty heavy lifting at the base of building the driver's meaningfully.

And so we continue to remain very enthusiastic about continuing to recycle.

Historically, as you've mentioned or kind of alluded to we've been able to do that accretively probably to the tune of 150 basis points to 200 basis points. Some of the immediate some of it through value creation over call. It a few years.

An example of that being $9 99, where we're going to do some pretty heavy lifting at the base of the building, but driver. It's meaningfully so it's tough to give you a specific answer in terms of spreads because.

So it's tough to give you a specific answer in terms of spreads because we don't know what we'll buy. But I can say that what we kind of have in the hopper to sell is either being non-core, some of the more mature assets. And of course, you've heard me allude to Cambridge being a great opportunity or piggy bank.

Because we don't know what will buy but I can say that what we kind of have in the hopper to sell as either being non core.

Some of the more mature assets and of course, you've heard me allude to Cambridge being a great opportunity or Piggy Bank I think we can continue to maintain accretion to what degree its hard to specifically say, but.

I think we can continue to maintain appreciation to what degrees are just specifically saved, but I think that trend is going to maintain itself given the quality of those assets that we have and or the long-term least nature of those assets that I mentioned that are in the disposition of.

I think that trend is going to maintain itself given the quality of those assets that we have and over the long term lease nature of those assets that I mentioned that are in the disposition hopper.

Okay, got it. And then you'd mention kind of where the sweet spot is in terms of working for high quality assets. I think you'd mention like seven years, at least term that sort of thing. Like how do you think about where your sweet spot is in terms of competing for these assets? And...

Okay got it and then.

You had mentioned kind of where the sweet spot is in terms of working for high quality assets. I think you had mentioned like seven year lease term that sort of thing how do you think about where your sweet spot is in terms of competing for these assets.

you know, out competing competition, it seems like everybody's looking for fairly comparable staff.

Our competing a competition it seems like everybody is looking for fairly comparable stuff.

You know, I think 999 speaks to volumes of kind of the opportunity set. You know, our recent acquisitions, both the Galleria asset.

I think 99 speaks to volumes of kind of the opportunity set.

Our recent acquisitions both of the Galleria assets.

right at the pandemic onset. Our good examples of historically what we've been able to find and create value with. Grace phones, older assets, but a need a little TLC on the front house, particularly, but the back house has been well maintained, so we're not focused too much on mechanicals, et cetera. So we're obviously continuing to look for that. We recognize that some of our peers are purchasing just newly developed assets with long-term walls.

Right at the pandemic onset are good examples of historically, what we've been able to find and create value with.

Great bones older assets, but I need a little TLC on the front of house, particularly with the back of house has been well maintained so we're not focused too much on mechanicals et cetera. So we're obviously continuing to look for that we recognize that some of our peers are purchasing.

Newly developed assets with long term Walt.

that is at frankly very eye-popping pricing in terms of per-pound valuation.

That is it frankly, very eye-popping pricing in terms of per pound valuations.

We understand the, I guess, the perspective that those individuals or groups have, but we've utilized our recycling and redevelopment DNA to dry earnings growth more than the risk of ground up development. That's not to say we wouldn't consider, sorry, acquiring buildings that are recently ground up development. Not to say that we wouldn't undertake that to enter into a new market or specifically gain stronghold in a sub-market.

We understand the I guess the perspective this isn't to individuals or groups have but we've utilized our recycling and redevelopment DNA to drive earnings growth more than the risk of ground up development, that's not to say we wouldn't consider sorry.

Acquiring buildings that are recently ground up development not to say that we wouldnt undertake that to enter into a new market or specifically gained strong hold in a sub market, but I think we're more leaning towards finding those diamonds in the rough buying them at call. It a six cap are six five depending on the hair.

but I think we're more leaning towards finding those diamonds in the rough buying them and call it a six cap or six and a half cap depending on the hair and driving them to seven and a half plus and I think all those that I mentioned in the beginning of this answer kind of qualify as that type

And driving them to 775, plus and I think all of those that I mentioned in the beginning of this answer kind of qualify as that type, but we're not I want to stress that we are not compromising on quality and he talked about our sweet spot. There are a lot of companies who are willing to come into a market, but can't afford to pay.

uh... we're not i want to stress that we're not compromising on quality we talk about our sweet five there are a lot of companies who are willing to come into a market

but can't afford to pay 45, $50 net rents for new construction.

A $45 $50 net rents for new construction, but they wanted to monetize high quality sustainability focused landlord and thats the sweet spot that we provide at a more affordable rate for that user group that is enough tech big five frankly.

but they want to miniatize high quality sustainability focus landlord and that's the sweet spot that we provide at a more i guess affordable rate for that user group that isn't up tax big five frankly

Got it okay I appreciate all the color. Thank you.

Your next question operator.

Your next question for today is coming from Dave Rogers. Please announce your affiliation. Then pose your question.

Your next question for today is coming from Dave Rodgers. Please announce your affiliation then pose your question.

Good morning everybody, Dave Rogers at Baird. I wanted to follow up on the asset sale discussion. Obviously you don't want to identify what you're looking at acquiring, but can you talk about what's in the market today? You talked about selling more during the first half of the year, so it's presumed that there's a number of assets in the market. Can you identify what the targets are when you say non-core? Is that just Houston? Is that we're going back to DC? It sounds like Cambridge is on the shopping block as well, but can you give us more of a sense of what to expect on the sell side?

Hey, good morning, everybody, Dave Rodgers of Baird.

I wanted to follow up on the asset sale discussion, obviously, you don't want to identify what youre looking at acquiring but can you talk about what's in the market today, you talked about selling more during the first half of the year. So I presume that there's a number of assets in the market can you identify kind of what the targets are when you say non core is that just Houston is that we're going back to D. C. It sounds like <unk>.

Bridges on the chopping block as well, but can you give us more of a sense of what to expect on the sell side.

Sure, I think you know, Dave, again, thank you for joining today. We look at this position as, you know, historically we've paired our disposition very well with our acquisitions. I think, you know, 999 is a perfect example. We went under contract actually on the Raytheon asset in the middle of 21. And, you know,

Sure I think David again, thank you for joining today.

We look at dispositions as you know.

Historically, we paired our dispositions is very well with our acquisitions I think 999 is a perfect example, we went under contract actually on the Raytheon asset in the middle of 'twenty, one and.

device structures so that we can opportunistically pair that with the buy. I think what's promising in this market is we're seeing more opportunities start to come to fruition. And so we get a bigger opportunity set gives us the ability to weigh a little bit longer to dispose of the assets. So I don't have anything specifically in the market at the moment that we're looking to dispose of. But we do have dialogue every day with participants.

Device structures, so that we can opportunistically pair that with the bi I think what's promising in this market as we're seeing more opportunities start to come to fruition and so we get a more a bigger opportunities that gives us the ability to weigh a little bit longer to dispose of the assets. So I don't have anything specifically in the market at the <unk>.

Moment that we're looking to dispose off but we do have dialogue every day with participants.

who we know we can move quickly and we'll say fair value if we needed to.

Who we know we can move quickly and pay fair value, if we needed to and now in terms of the buys I think we're looking at.

and now in terms of the buys i think we're looking at um... you know well we wanted to focus on this position so i think i'll leave it at that uh... so i think we have a good opportunity set again that is houston in that non-core bucket it includes Cambridge i use the term chopping block i i don't know if i i would phrase it at that but it is certainly

Well you wanted to focus on disposition, so I think I'll leave it at that so I think we have a good opportunity set again that is Houston in that noncore bucket. It includes Cambridge I used the term chopping block I don't know if I would phrase it is that but it is certainly fully matured under our ownership. It's got about little over 10 years of term remaining with a major.

fully matured under our ownership, it's got about a little over 10 years of term remaining with the major tent there being harbored in both of those assets. And frankly given what pricing it is, it call it a four and a half.

Tenant there being Harvard and both of those assets.

And frankly, given where pricing is at call. It a four and a half kind of $600 a foot for some assets in that market.

kind of $1,600 a foot for some assets in that market, we feel like it's a great opportunity to monetize that and rotate it into something it credo.

We feel like it's a great opportunity to monetize that and rotated into something accretively.

I hope we, you know, and looking towards a 23-Event, I would say 60-Broad would be a potential monetization opportunity set there as well.

And looking towards the 23 event I would say 60 bra it would be a potential monetization opportunity set there as well.

Maybe one for Bobby just in terms of the guidance since you're not including acquisitions and dispositions in the guidance this year. It's a fairly wide range from an operational perspective. What really kind of pushes you up and down in that range? Do you have any more? It looks like you kind of grabbed another million dollars or so from the gap deferrals previously and added that back in the quarter. Do you have more of those that get you to the top end and is the bottom end just

Maybe one for Bob just in terms of the guidance since youre, not including acquisitions and dispositions in the guidance. This year, it's a fairly wide range from an operational perspective, what what really kind of pushes you up and down in that range do you have any.

More it looks like you've kind of grabbed another $1 million or so from the GAAP deferrals previously and added that back in the quarter do you have more of those that gets you to the top end and is the bottom and just.

kind of move out the exploration terminations, maybe some guidance on that would be helpful.

Kind of move outs the exploration of the terminations, maybe some guidance on that would be helpful.

Yes.

Well, obviously, when we release Dave, our guidance, the midpoint is typically the target we try to focus upon. I think over the last several years, absent of COVID, we've come in a little ahead on those. So hopefully we're conservative with our estimates.

Well, obviously, when we release our guidance the midpoint is typically the target we try to focus upon I think over the last several years absent Covid we've come in a little ahead on those so hopefully we're conservative with our estimates.

But I don't know how to respond to you. There are a number of factors that influence our actual learnings. It depends on our leasing activity that takes place. We try to make good long-term decisions there in may result in down times as we try to bring investment-grade tenants things like that that are not predictable as such. So leasing always is the key driver for us that influences what we achieve in a given year.

But I don't know how to respond to you in a number of factors that influence our actual earnings depends on our leasing activity that takes place we try to make good long term decisions there and May result in downtime.

We try to bring in investment grade tenants things like that that are not predictable as such so leasing always is the key driver for us that influences what we achieve in a given year.

I think I would add, Bobby, operationally, we are still in the midst of a pandemic. There are components of parking, in the return to office, variable expenses that create some of that.

I would add Bobby operationally, we are still in the midst of the pandemic there are components of parking.

And the return to office variable expenses that create some of that.

you know fluctuation and we've done our best to predict that but frankly nobody could have predicted well Delta you know once you saw Delta maybe you could have predicted Omokron but I think we're trying to be cognizant that there could be a Zeta or you know something else to that effect that could continue to delay but realistically we feel like 22 is moving in the right direction and that's where the midpoint of the range would suggest

Fluctuation and we've done our best to predict that but frankly, nobody could have predicted well delta. Once you saw delta maybe you could've predicted omicron, but I think we're trying to be cognizant that there could be data or something else to that effect that could continue to delay, but realistically we feel like 'twenty two is moving in the right direction and.

And Thats, where the midpoint of the range would suggest.

last one for me if I could. I guess I wanted to get your thoughts on two things. Obviously, you'd continue to do the stock buyback in the quarter. I think your average buyback price going back to 2011 is above where the stock is today. You talked about increasing the dividend on the call in the middle still of a pandemic. You have an above average financial position relative, meaning more financial leverage than your peers. You have a higher rollover schedule of massive tenants coming due. So, I guess why the hurry to deploy all this capital, especially after a quarter when concessions on leases were pretty tough?

Last one for me if I could.

I guess I wanted to get your thoughts on two things.

<unk> continued to do the stock buyback in the quarter I think your average buyback price going back to 2011 is above where the stock is today.

You talked about increasing the dividend on the call in the middle still of a pandemic you have an above average financial position relative meaning more financial leverage than your peers are higher rollover schedule of massive tenants coming due so I guess why why the hurry to deploy all of this capital, especially after a quarter when concessions on lease.

Leases were pretty tough and you've got a lot coming at you.

And you got a lot coming up.

Got it a lot in there Dave I guess first let me take.

rather than a lot in their day. I guess first let me take the quarter, you know.

The quarter.

Admittedly, the renewals were a little high, each one of those kind of three deals that we alluded to in our supplemental that were, unusually high, TI'd have a reason behind that. Not to give them the specifics, but one involved mainly moving around smaller tenants to get a large investment grade hidden into the space.

I admittedly the renewals were a little high each one of those kind of three.

Deals that we alluded to in our supplemental that we're.

Unusually high Ti has a reason behind that not to get into specifics, but weren't involved mainly moving around smaller tenants to get a large investment grade tenant into the space.

And so we continue to do what's right by the real estate. And sometimes that does mean spending a little bit more for a tenant. And that's, since a few of those happen hitting the same quarter, that's why we always ask that our investors look at more of the rolling We will not be cambiar, we will again be solving

And so we continue to have.

Do what's right by the real estate and sometimes that does mean spending a little bit more for a tenant in that instance, a few of those happen to hit in the same quarter and Thats why we always.

Our investors look at more of a rolling 12 months and look at those trends and I think you will find on a rolling 12 months, we still are trending and kind of right in line with prior years premium and during Covid.

So I think our capital front, we don't feel like there's a wall of capital from our perspective, there's the regular way leasing and certainly we will admit that concessions have gone up on the Ti side in the pandemic, while free rent has.

that concessions have gone up on the TI side in the pandemic while free rent has dropped more dramatically. But we recognize that overall, I think our portfolio from a capital standpoint will stand against anybody else is that we don't have an unusual amount of draining needs in that regard. In terms of our debt profile, we've always stated we operate between 30 and 40% and it call it a sub-6 debt to EBITDA and I'm very focused on maintaining our credit rating and there is no concern with our rating agencies. We're both stable from both groups.

Dropped more dramatically.

But we recognize that overall I think our portfolio from a capital standpoint will stand against anybody else's and we don't have an unusual amount of training needs in that regard in terms of our debt profile.

In terms of our depth profile, we've always stated we operate between 30 and 40% and it call it a sub-6 debt to EBITDA and I'm very focused on maintaining our credit rating. And there is no concern with our rating agencies who are both stable from both groups.

We've always stated we operate between 30% and 40%.

And I call. It a sub six debt to EBITDA and I'm very focused on maintaining our credit rating and there is no concern with our rating agencies were both stable from both groups.

And we feel like the balance sheet is well protected. Our line is currently, you know, has some drawn, but we've obviously alluded to. We do anticipate a paydown of the note from our bridge water properties. So that'll bring our line down into the call at several tens of millions. And we feel like that gives us the capacity to operate the business.

And we feel like the balance sheet is well protected our line is currently has some drawn but we've Bobby has alluded to we do anticipate a paydown of the note from our Bridgewater properties, So that will bring our line down.

Down into call. It several tens of millions and we feel like that gives us the capacity to operate the business as we feel is reasonable our peers, who are lower leveraged or more development focused in heavy than we are if we do get into the more of development, we would probably consider taking our leverage down a little bit into probably.

as we feel as reasonable. Our peers who are lower leveraged are more development focused and heavy than we are. If we do get into the more of development, we would probably consider taking our leverage down a little bit into probably the low 30s.

The low thirty's, but.

But at the moment, I feel like that's probably still a 23 Event to put a shovel on the ground on our site even though we are talking to some tenants Realistically, it's gonna take some time to get that so we view 2022 is a good opportunity to continue to to rotate capital you did note we bought back shares We never view buying back shares is mutually exclusive from buying a rotating asset capital into assets

But at the moment I feel like that's probably still a 'twenty three event to put a shovel in the ground on our site, even though we are talking to some tenants realistically, it's going to take some time to get that so we view 2022 is a good opportunity to continue to rotate capital you did note we bought back shares we never view.

Buying back shares is mutually exclusive from buying a rotating asset capital into assets and.

And frankly, we feel like at the time, when we purchase those shares, Ryman Omaha said in and still believe we're an undervalued company, I think. But we trade above an eight cap on a cap rate basis if you use a green streets estimate of NOI. And we feel like we're certainly undervalued in that regard and would buy back shares when we kind of fit the framework. And I've said before that framework worked is generally when we trade at a meaningful discount to NAV both on a relative and an absolute basis versus our peers. And when we're not leveraging up to do so, and that framework still holds today and those shares were bought during that framework.

And frankly, we feel like at the time, when we purchase those shares.

Right.

And still believe we are an undervalued company I think we trade at the ABA.

<unk> an eight cap.

A cap rate basis, if you use take green streets estimates of NOI and we feel like we're certainly undervalued in that regard and would buy back shares when we kind of fits the framework and I've said before that framework work is generally when we trade at a meaningful discount to NAV, both on a relative and an absolute basis versus our peers.

<unk>.

And when we're not levering up to do so and that framework still hold today and those shares were bought during that framework and your reference to the buyback since 2011, understandably I think our average buyback price is readily right around where we're trading today.

In your reference to the buyback since 2011, understandably, I think our average buyback price is right around where we're trading today. And we continue to frankly focus more on assets today than stock.

And we continue to.

Frankly focus more on assets today than stock.

Well Brent, thanks for all the color and I appreciate your indulgence on the time.

Well Brent Thanks for all the color and I appreciate your indulgence on the time, yes.

Yes.

Your next question is coming from Michael Lewis. Please announce your affiliation then pose your question.

Your next question is coming from Michael Lewis. Please announce your affiliation, then pose your question. Great. This is Michael Lewis.

Great. Thanks, This is Mike Lewis that true.

You know, this quarter it looked like you had more cat-x classified as incremental as opposed to non-incremental and therefore not fact out of the ASFO calculation.

This quarter. It looked like you had more capex classified as incremental as opposed to non incremental.

Therefore in Opex out of the area.

Oh calculation maybe.

Maybe that's related to some of the activity you already talked about. Can you just clarify what that 25 million of incremental cost was related to? And, you know, there's still a lot to spend and allocate to that pocket.

Maybe that's related to some of the activity you already talked about could you just clarify what that $25 million.

Incremental cost was related to.

There's still a lot to spend.

To allocate to that bucket.

That was primarily related to some base building work at 60 broad in the redevelopment of that asset for the lower floors. There was a new race-pranked HVAC mechanical system and some additional components as well as just some of the regular way redevelopment of some of our properties.

That was primarily related to some base building work at 60 broad in the redevelopment of that asset for the lower floors. There was a new frankly, HVAC mechanical system and some additional components as well as just some of the regular way redevelopment and some of our properties I would not anticipate.

I would not anticipate that that would continue. Bobby.

Paid that would continue.

Bobby.

The office is going to comment, we do track with each of our leases, the incremental versus non-infermental, what we're doing at buildings. We have outstanding projects, Leslan.

I was just going to comment we do track with each of our leases the incremental versus non incremental what we're doing at buildings, we have outstanding projects less than.

$15 million an hour on the incremental side. Now if we go buy something, start to do a lobby, enhance the building, that will add to that number. And then just one more for me.

$15 million now on the incremental side. We go buy something has got to do a lobby enhance the building that will add to that number.

Okay. Thanks, and then just one more from me.

I know you get asked frequently about the CVS Lee's expiring end to the year.

I know you get asked frequently about the Cvs lease expiring at the end of the year.

And then next year, Ryan Cargill, US Bank Corp, I think a previous question kind of alluded to these coming up.

And then next year, Ryan Cargill U S Bancorp.

I think a previous question you kind of alluded to these coming up I don't know if you talk about it frequently I think is there anything incremental to be aware of either changes and how you think about market rates for market rents versus in place or anything else to report on any of those.

I don't know if you talk about it frequently, I think. Is there anything incremental to be aware of either changes in how you think about market risk versus in place or anything else to report on any of those upcoming upgrades?

Aspirations.

Hi, Michael. It's Brent. Thanks for joining. You know, we do get asked about this expiration. I think as the prior question alluded to the number of potential expressions that we have in the next call at 24 months and why raise the dividend. I think the reason why we feel like we can raise the dividend is we feel generally pretty good about the leasing market and where that dialogue is with those tenants. So specifically with CVS, as we've noted before, we're well down a path and feel like that it's likely that they'll reduce the majority of the space. It's been noted in the press. Ryan has a site they've considered going and building a building on up in Frisco. Right now their expiration is latest for the end of next year. Sorry, February of next year. And likely they're going to have to do at least a short term renewal because it's going to take some probably two and a half months. So we're thinking of the bank and Cargill. Those of those are pretty far out still end of 23 and 24. So it's a little early, but I will say we're close to both groups and engaged. It's a pretty comfortable about where that stands. Although again, it is really early, but US bank has been headquartered in a stalwart corporation and Minneapolis and intends to continue to be there. And Cargill, we feel pretty good about where the early dialogue is then. So that's where it stands at the moment. But again, I think we feel good. We're pretty good about where all the leasing velocity is and our ability to then look forward and say to spread between AFFO and where our current dividend end. Dividend is very meaningful. Call it $1.10 to $1.20 in terms of AFFO and a dividend of 84 cents. So our ability to raise that 5% or so is really modest relative to where the cash flow of the operating assets is.

Hi, Michael it's Brad Thanks for joining.

We do get asked about those expirations I think as the prior question alluded to.

The number of potential expirations that we have in the next call. It 24 months and why raise the dividend I think the reason why we feel like we can raise the dividends we feel generally pretty good about the leasing market and where that dialogue is with those tenants.

So specifically with Cvs as we've noted before we're well down the path and feel like that it's likely that they'll renew on a majority of that space.

As been noted in the press Ryan has a site they've considered going and building a building on up in Frisco.

Right now their exploration is slated for the end of next year, sorry February of next year.

And.

Likely they're going to have to do at least a short term renewal renewal because it's going to take them, probably 253 years, if they could put a shovel in the ground tomorrow and that is not currently underway in terms of U S Bank and Cargill, those are pretty far out still and a 23% and 24. So it's a little early but I will say, we're close with both groups and engaged.

And feel pretty comfortable about where that stands although again it is really early but U S Bank is.

Headquartered in Stalwart Corporation in Minneapolis, and intends to continue to be there and cargo. We again, we feel pretty good about where the early dialogue has been so that's where it stands at the moment, but again I think we feel pretty good about.

Where all the leasing velocity is and our ability to then look forward and say the spread between <unk> and where our current dividend dividend is very meaningful call. It $1 10 to $1 20 in terms of <unk> and a dividend of <unk> 84, <unk>, so our ability to raise that 5% or so is really.

Just relative to where the cash flow of the operating assets.

Perfect. Thank you for the update.

Perfect. Thank you for the update.

Once again, if there are any questions or comments, please press star one on your phone at this

Once again, if there are any questions or comments. Please press star one on your phone at this time.

Your next question is coming from Daniel Isnell. Please announce your affiliation, then pose your question.

Your next question is coming from Daniel is now please announce your affiliation then pose your question.

Great. Thank you Dana is now from Green Street.

Great, thank you, Danias Mel from Green Street. Brence, touch on this a few times during the call, but you mentioned the increased focus on amenities, and types of place in the office, as well as increased concessions in some markets and supply chain issues. Is it your sense that normalized a fax has moved higher for the sector or is this more of a point in time?

<unk>.

You touched on this a few times during the call, but you mentioned the increased focus on amenities and sense of place in the office.

As well as increased concessions in some markets and supply chain issues is it your sense that normalized.

Next is moved higher for the sector or was this more of a point in time.

Bob.

You're, I'm sorry, you kind of, you're treated off there a little bit of the end. I think you said, do we feel like where in this environment is a normalized cat-x environment for the sector?

Yes.

Alright.

The trade off there a little bit then I think you said do we feel like we're in this environment is a normalized capex environment for the sector.

No, I just apologize for a while. I was saying, do you think that capex for the sector has just structurally moved higher over the last two years as a result of increased focus on amenities and perhaps a higher confessionary environment or are you anticipating that to reverse back-to-free code?

I guess, sorry, if I <unk> I was saying.

Do you think that.

Capex for the sector has structurally moved higher over the last two years as a result of increased focus on many of these areas.

<unk>.

Perhaps a higher concessionary environment or are you anticipating that should reverse back to pre COVID-19 levels.

Yeah, I think Danny, I guess definitely would agree to you. Currently, it is definitely elevated. I think it is partly due to the pandemic and people trying to take advantage of a softening in the marketplace. And frankly, we've seen free rent still be very limited, but TI capital kind of ruled the day because you have frankly a tenant's market. And they've continued to not want to come out of pocket for a build out.

Yes, I think Danny I guess definitely would agree with you currently and is definitely elevated I think it is partly due to the pandemic and people trying to take advantage of a softening in the marketplace and frankly, we've seen pre rent still be very limited, but ti capital.

Kind of rule the day because you have.

Frankly, it's been a tenants market.

And they've continued to not want to come out of pocket for build outs.

In terms of the opportunity set of the amenities, et cetera, I think every building has an evolution and you need to evaluate when we buy buildings we do. When that kind of opportunity needs to refresh and to be able to drive rent and drive velocity. So for a building, it kind of depends on where it is in its life cycle. We see some buildings that are older in nature but have been well maintained and ammetitized and they do very well in the marketplace.

In terms of the opportunity set of the amenities et cetera, I think.

Every building Hasnt evolution, and you need to evaluate when we buy buildings, we do win that kind of opportunity is to it needs. A refresh and then are you able to drive rents and drive velocity. So for one building it kind of depends on where it is in its lifecycle.

See some buildings that are older in nature, but have been well maintained and monetize and they do very well in the marketplace, but we want to recognize that there are commodity product that would make sense to invest in anymore.

But we want to recognize that there are commodity products that would make sense to invest in anymore and probably better and different use. Fortunately, our product isn't of that nature, but I do think you're gonna see just overall in the sector, which already was starting before the pandemic, that commodity obsolescence will continue to take hold, and as I alluded to in my prayer remarks, and disparity between kind of a quality assets and then most everything else.

And probably better in different use fortunate and our product is of that nature, but I do think youre going to see just overall in this sector, which already was starting before the pandemic that commodity obsolescence will continue to take hold and as I alluded to in my prepared remarks, a disparity between kind of a quality assets and then most everything else and.

And reinvesting in the A's are going to continue to help drive rent and just continue that disparity between unemunitized commoditized products.

Reinvesting in the as we're going to continue to help drive rent and just continue that disparity between on a monetized commoditized product.

And so I think from our strategy, we think that wins itself well.

I think from our strategy, we think that lends itself well.

It's definitely that flight quality boathed itself towards our product versus

Definitely that flight to quality bodes itself towards our product versus.

the latter but i do think overall the sector that cat that profile has been elevated up uh... in terms of being able to fall back from the ten side uh... i think you're gonna see likely more drive and rate uh... then i've been a reduction in that capital it still i think that most of my peers would probably agree you're looking at call it

The latter, but I do think overall that sector that capex profile has been elevated up and then in terms of being able to claw back from the tenant side, I think youre going to see likely more of driving rate.

And then a reduction in that capital is still I think most of my peers would probably agree you're looking at call. It.

$650 to $8 per square foot per year of term in terms of capital.

$650 to $8 per square foot per year of term in terms of capital.

Depending on them already thank you Beth.

That's helpful thanks and I believe the last time you provided the Pacific Europe portfolio rents were about 5 to 10% below markets. Let's build a case.

Great Brian .

Helpful. Thanks, and I believe last time, you provided does pick back in your portfolio rents were about 5% to 10% below market is that still the case.

Yes, that is absolutely the case. I think as we've continued to show, again, on a rolling 12 months, I think, quarterback quarter can be choppy, but on a rolling 12 months, we're right in that sweet spot between the five and 10, and I think that's very indicative of where the portfolio still stands. We've been pleased that we've held rate on a good bit of the portfolio, although net effectors are down in the single digits. And some of our markets and flat and others, almost now, in a versus pre-pandemic level. You'll still have 1,000 outtage Nintendo 4() , devaranating wealth into five directions, and keeping it out,

Yes that is absolutely the case I think as we've continued to show again on a rolling 12 months I think quarter by quarter can be choppy, but on a rolling 12 months, we're right in that sweet spot between five and 10 and I think that's very indicative of where the portfolio is still stands we've been pleased that we've held rate on a good bit of the portfolio, although net effective there down in a single.

Digits, and some of our markets and flat and others almost now versus pre pandemic levels.

Great. Thanks, Brian .

There are no more questions in Q. I would now like to turn the floor back over to Brent Smith for any closing comments.

There are no more questions in queue I would now like to turn the floor back over to Brent Smith for any closing comments.

Thank you everyone for joining us today. Myself and the team are really excited about 2022 and really continuing the growth and particularly the new leasing at pre-pandemic levels at the end of last year and to this year. You know, six percent of our leases expire this year and with 60 percent of our vacancy and 85 percent of our role in the sunbelt, we really are enthused about the ability to continue to drive velocity and occupancy.

Thank you everyone for joining us today myself and the team are really excited about 2022, and really continuing the growth and particularly the new leasing.

At pre pandemic levels at the end of last year into this year.

6% of our leased leases expire this year and with 60% of our vacancy at 85% of our role in the Sunbelt, we really are enthused about the ability to continue to drive velocity and occupancy.

We feel like we've got a best ESG platform and paired with our high quality, a miniatized assets, we'll continue to drive earnings growth. Thank you everyone for joining today.

We feel like we've got our best ESG platform and paired with our high quality of monetized assets will continue to drive earnings growth.

Thank you everyone for joining today have a good day.

Thank you ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you.

You for your participation.

[music].

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I.

Good morning ladies and gentlemen and welcome to the Peatmont Office Realty Trust 4th quarter 2021 earnings call. At this time all participants have been placed on the list in only mode and we will open up the floor for questions and comments after the presentation.

Good morning, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust fourth quarter 2021 earnings call.

At this time all participants have been placed on a listen only mode. We will open up the floor for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Eddie Gilbert. Sir, the floor is yours.

It is now my pleasure to turn the floor over to your host Eddie Gilbert Sir the floor is yours.

Thank you, operator. And good morning, everyone. We appreciate you joining us today for Piedmont's fourth quarter, 2021, Earnings Conference Call. Last night, we filed an 8K that includes our earnings release and our unaudited supplemental information for the fourth quarter that's available on our website at PiedmontREET.com under the Investor Relations section.

Thank you operator, and good morning, everyone. We appreciate you joining us today for Piedmont's fourth quarter 2021 earnings Conference call last night, we filed an 8-K that includes our earnings release and our unaudited supplemental information for the fourth quarter. That's available on our website at Piedmont Green Dot com under the Investor Relations section.

During this call, you'll hear from senior officers at Piedmont and they may refer to certain non- GAAP financial measures such as FFO, Core FFO, AFFO and same store NLI. The definitions and reconciliation of these non- GAAP measures are contained in the Erniezer lease and in the supplemental financial information.

During this call you'll hear from senior officers of Piedmont, and they may refer to certain non-GAAP financial measures such as <unk> core <unk> <unk> and same store NOI the definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information.

Also, on today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Security's litigation reform act of 1995.

Also on todays call the Companys prepared remarks and answers to your questions will contain forward looking statements as defined in the private Securities Litigation Reform Act of 1095.

These four looking statements address matters which are subject to risks and uncertainties. And therefore, actual results may differ from those we anticipate and discuss today.

These forward looking statements address matters, which are subject to risks and uncertainties and therefore actual results may differ from those we anticipate and discuss today.

The risks and uncertainties of these forward-looking statements are discussed and are press release as well as in our SEC file.

The risks and uncertainties. These forward looking statements are discussed in our press release as well as in our SEC filings.

We encourage everyone to review the more detailed discussions related to risks associated with forelooking statements in our SEC filings. Examples of forelooking statements include those related to Piedmont's feature revenues and operating income, dividends, and financial guidance.

We encourage everyone to review the more detailed discussions related to risks associated with forward looking statements in our SEC filings examples.

Looking statements include those related to Piedmont future revenues and operating income.

Dividends and financial guidance.

Future leasing and investment activity and the impacts of this activity on the company's financial and operational results. You should not place any undue reliance on any of these four-looking statements in these statements speak as of the day they are made.

Future leasing and investment activity and the impacts of this activity on the company's financial and operational results and you should not place any undue reliance on any of these forward looking statements and these statements speak.

As of the date they are made.

At this time, our president and chief executive officer, Brent Smith, will provide some opening comments and discuss our fourth quarter and annual results in accomplishments.

At this time, our president and Chief Executive Officer, Brent Smith.

<unk> will provide some opening comments and discuss our fourth quarter and annual results and accomplishments.

Brent.

Good morning everyone and thank you again for joining us on today's call as we review our financial and operating results for the fourth quarter of 2021 and for the year.

Good morning, everyone and thank you again for joining us on today's call as we review our financial and operating results for the fourth quarter of 2021 and for the year.

On the line with me is Eddie Gilbert, our Executive Vice President of Finance and Treasurer, towards Wells, our Chief Operating Officer, and Bobby Bowers, a Chief Financial Officer, as well as other members of the Senior Management team.

On the line with me as Eddie Guilbert, our executive Vice President of Finance and Treasurer, George Wells, Our Chief operating Officer, and Bobby Bowers, Chief Financial Officer, as well as other members of the senior management team.

Before we begin today's call, I want to take a moment and thank my talented, hardworking team members who deliver first class service to Piedmont customers 24-7, 365 days a year. Their tireless dedication continues to garner industry honors for operational excellence and sustainability, including our recognition as a 2021 Energy Star partner of the year and achieving lead status now on roughly half the portfolio.

Before we begin today's call I want to take a moment and thank my talented hard working team members, who deliver first class service to Piedmont customers $24. Seven 365 days a year their tireless dedication continues to garner industry honors for operational excellence and sustainability, including our recognition of the two.

'twenty, one energy star partner of the year and achieving lead status now in roughly half the portfolio.

Today I'm going to cover PMOI's operational success in leasing momentum, along with an update on capital allocation activities across our market.

Today, I am going to cover piedmont's operational success in leasing momentum along with an update on capital allocation activities across our markets.

focusing on the fourth quarter of 2021, our FFO per share was 51 cents and lying with market consensus.

Focusing on the fourth quarter of 2021, our <unk> per share was <unk> 51.

In line with market consensus.

Portfolio operating metrics were solid, with same store NLI on a cash basis and increasing 5.8%.

Portfolio operating metrics were solid with same store NOI on a cash basis, and creating increasing five 8%.

We leased approximately 400,000 square feet, generated a 3% increase in second generation cash rents, and executed an average lease term of

We leased approximately 400000 square feet generated a 3% increase in second generation cash rents.

And executed an average lease term of six five years.

illustrating the longer term view taken by most our customers. Most notably, about half of the fourth quarter's leasing was related to new tenants, making this the second consecutive quarter PIMON has achieved pre-pandemic levels of new lease.

Illustrating the longer term view taken by most of our customers most notably about half of the fourth quarter's leasing was related to new tenants, making this the second consecutive quarter Piedmont achieved pre pandemic levels of new leasing.

Overall, leasing activity remained robust and well dispersed across the portfolio with over 40 leases and amendments executed during the fourth quarter. And while the Oma Cron variant had a modestly negative impact on building utilization during December and January , the leasing pipeline has not dissipated and we expect the momentum from the second half of 2021 to continue.

Overall leasing activity remained robust and well dispersed across the portfolio with over 40 leases and amendments executed during the fourth quarter and while the omicron variant had a modestly negative impact on building utilization during December and January the leasing pipeline has not dissipated and we expect the momentum from the <unk>.

Second half of 2021 to continue.

Today our leasing pipeline stands at over 500,000 square feet in negotiations and we're trading L.O.I.s on an additional 1 million square feet which positions Piedmont for space absorption in 2022. And with only about a million square feet of existing leases expiring or about 6% of the portfolio.

Today, our leasing pipeline stands at over 500000 square feet in negotiations and we're trading LOI on an additional 1 million square feet, which positions Piedmont for space absorption in 2022.

And with only about 1 million square feet of existing leases expiring or about 6% of the portfolio.

Boston, Dallas, and Atlanta remain our most active leasing markets. I'll be it for different reasons.

Boston, Dallas, and Atlanta remain our most active leasing markets, albeit for different reasons.

The Boston Market continues to exhibit strong fundamentals led by business migration to the suburbs and reduce competitive class A office stock as the insatiable demand from life science users continues to drive office to lab conversion.

Boston market continues to exhibit strong fundamentals led by business migration to the suburbs and reduced competitive class a office stock is the insatiable demand from life Science users continues to drive office to lab conversions.

For example, during the past year in our Burlington sub market, three competitive class A buildings comprising over 400,000 square feet have been repurposed to lab, helping to push net effective rents for office space to pre-pandemic levels.

For example, during the past year in our Burlington Submarket three competitive class a buildings comprising over 400000 square feet have been repurposed to labs, helping to push net effective rents for office space to pre pandemic levels.

And in Dallas and Atlanta are two largest markets. We continue to see an increasing number of corporate relocations resulting in meaningful job growth.

And in Dallas, and Atlanta are two largest markets. We continue to see an increasing number of corporate relocations, resulting in meaningful job growth.

As an example, during the fourth quarter, we signed a 55,000 square foot lease at our connection drive property in Dallas to serve as the new corporate headquarters of an undisclosed Fortune 500 company.

As an example during the fourth quarter, we signed a 55000 square foot lease at our connection drive property in Dallas to serve as the new corporate headquarters of an undisclosed Fortune 500 company.

And in that same market during the second quarter, we signed a 44,000 square foot lease to serve as the corporate headquarters for large national beverage distributor.

And in that same market during the second quarter, we signed a 44000 square foot lease to serve as the corporate headquarters for large national beverage distributor.

In both these markets, rinse at our properties are now above pre-pandemic levels. However, net effective rinse are approximately 2% to 5% lower. I would note, a customer-flex quality is well underway, which is driving wider rinse disparities between place-making versus commodity office product. For example, JL Research noted that 84% of Atlanteis in activity in the fourth quarter was in class A or trophy product.

In both these markets rents at our properties are now above pre pandemic levels. However, net effective rents are approximately 2% to 5% lower.

I would note a customer flight to quality is well underway, which is driving wider rent disparities between place making versus commodity office product. For example, gel research noted that 84% of Atlanta leasing activity in the fourth quarter was in class a trophy product.

Orlando also continues to perform well with leasing and tour activity across all five of our downtown properties at pre-pandemic levels.

Orlando also continues to perform well with leasing and tour activity across all five of our downtown properties at pre pandemic levels.

The downtown sub-market continues experience population inflows, particularly for the Millennial and Gen Z cohorts, driven by a highly walkable environment with expanding retail, food and beverage options, along with entertainment amenities surrounding the University of Central Florida's creative village campus, Amway, Center Arena, and Camping World Stadium, along with a uniquely urban Lake Eola.

The downtown sub market continues to experience population inflows, particularly for the millennial and Gen Z cohorts driven by a highly walkable environment with expanding retail food and beverage options, along with entertainment and many amenities surrounding the university of Central Florida as creative village campus.

Center Arena and camping World Stadium, along with a uniquely urban Lake ULA.

In Orlando, net effective rinse are still trailing pre-pandemic levels by about 5% as a result of increased concession.

In Orlando net effective rents are still trailing prepaying demick levels by about 5% as a result of increased concessions.

Finally, Minneapolis, the District and Washington DC, and New York City are all experiencing increasing tour activity. However, leasing velocity and tuning demand still lag our Sunbelt market.

Finally, Minneapolis the district in Washington, D C and New York City, all experiencing increasing tour activity, however, leasing velocity and tenant demand is still lag our sunbelt markets.

I would add, we are fortunate to have limited vacancy and near-term leaf expressions that are 60 broad street property in Lower Manhattan and virtually no expressions that are washed in DC properties for more than two years.

I would add we are fortunate to have limited vacancy and near term lease expirations at our 60 broad Street property in lower Manhattan, and virtually no exploration at our Washington, DC properties for more than two years.

Leaking across all our core markets contributed to the fourth quarter's total.

Leasing across all our core markets contributed to the fourth quarter's totals.

and our customer CEO and HR dialogue continues to show our portfolio's position to gain market share. Users of Office space are undertaking a flight to quality that focuses on new or newly renovated office buildings with unique environments and a vast set of amenities, own and operated by responsive, sustainability-minded, service-oriented landlords. And because of these demand drivers, PMAX portfolio's well-position...

And our customers CEO and HR dialogue continues to show our portfolio is positioned to gain market share users of office space are undertaking a flight to quality that focuses on new or newly renovated office buildings with unique environments and I've asked that of amenities owned and operated by responsive sustainability minded service oriented landlord.

And because of these demand drivers piedmont's portfolio is well positioned supported by concentration of newly renovated well monetize buildings located near housing communities and highly regarded education systems with easy accessibility to a major highway thoroughfares in airports, but today's tenants are not only focused solely on location and navy.

supported by a concentration of newly renovated, well-eminentized buildings located near housing communities and highly regarded education.

With easy accessibility to major highway throwfairs and airpods.

But today's tenants are not only focused solely on location and neighboring amenities, the physical attributes of a building have never been more important. The building's indoor air and light, HVAC, fresh air intake, elevator capacity, and outdoor collaboration space are all critical.

Entities, the physical attributes of the building have never been more important.

Buildings enduring Aaron light HVA C fresh air intake elevated capacity and outdoor flavor collaboration space are all critical.

In addition to high quality building and a vibrant environment, customers are demanding a higher quality landlord as well. And by that, we meet an attentive operator that focuses on a sustainability initiative in which has a capital base and scale to provide tenant offerings and engagement. Office space is no longer just a real estate product.

In addition to high quality building and a vibrant environment customers are demanding a higher quality landlord as well and by that we mean, an attentive operator that focuses on our sustainability initiatives and which has the capital base and scale to provide offerings and engagement office space is no longer just a real estate product.

Taking a look back at the operational highlights for the 2021 fiscal year, PMOT leased almost 2.3 million square feet, which was in line with our average pre-COVID annual leasing level.

Taking a look back at the operational highlights for the 2021 fiscal year Piedmont leased almost $2 3 million square feet, which was in line with our average pre COVID-19 annual leasing levels.

In addition, the increase in second generation cash rents was 7.5%, which helped increase same-store cash in a life of the year by almost 7%.

In addition, the increase in second generation cash rents was seven 5%, which helped increase same store cash NOI for the year by almost 7%.

And finally, our tenant retention ratio was in line with prior years at approximately 70%.

And finally, our tenant retention ratio was in line with prior years at approximately 70%.

Recovery and leasing activity bolsters our optimism for the rebound of the office sector and particularly for landlords such as ourselves who offer high quality, modernized, sustainability focused and mini-rich environments. Looking ahead, approximately 750,000 square feet of tenant leasing has yet to commence as of this year end or is in some form of a bait

The recovery and leasing activity bolsters, our optimism for the rebound of the office sector, and particularly for landlords such as ourselves who offer high quality modernized sustainability focused amenity rich environment. Looking ahead, approximately 750000 square feet of tenant leasing has yet to commence as of this year end.

Or is it some form of abatement.

This backlog creates organic growth opportunities going into 2022, associated with approximately 26 million in future annualized cash rents.

This backlog creates organic growth opportunities going into 2022 associated with approximately $26 million in future annualized cash rent.

In addition, approximately 60% of the portfolio is vacancy, and 85% of 2022 lease expiration reside in our Sunbelt Properties. We are experiencing the greatest level of leasing the loss.

In addition, approximately 60% of the portfolio the vacancy and 85% of 2022 lease expirations resided in our sunbelt properties, where we are experiencing the greatest level of leasing velocity.

A schedule that larger upcoming lease commitments and abayments is included in our supplemental financial information, which was followed last night. Pivoting.

As scheduled the larger upcoming lease Commencements and abatements is included in our supplemental financial information, which was filed last night.

Pivoting now to capital allocation activities. Despite the disruption from the pandemic and more recently the omicron variance the office investment sales market has continued to unfold.

Despite the disruption from the pandemic, and more recently, the Omicron variant, the Office Investment Sales Market has continued to unfold. We are currently in discussions on a pipeline of over $1 billion of high quality assets, primarily for properties in our Sunbelt Market.

We are currently in discussions on a pipeline of over $1 billion of high quality assets, primarily for properties in our Sun belt markets.

Furthermore, we are encouraged to hear of several targeted buildings that will be coming to market in the first half of 2022.

Furthermore, we are encouraged to hear of several targeted buildings that will be coming to market in the first half of 2022.

Our principal and broker dialogue suggests insurance companies, pension funds, and other private market participants are planning to reduce their office sector exposure in the near term. And currently, well-leased Sunbelt Office with more than seven years of weight-average lease term is among the most liquid type of property in the asset class.

Our principal and broker dialogue suggests insurance companies pension funds and other private market participants are planning to reduce their office sector exposure in the near term and currently well leased Sunbelt office with more than seven years of weighted average lease term is among the most liquid type of property in the asset class.

The increase in transactional activity is encouraging, given Piedmont's tragedy to recycle capital strategically as an additional driver for our earnings growth.

The increase in transactional activity is encouraging given piedmont's strategy to recycle capital strategically.

As an additional driver for our earnings growth.

And finally, I would note that cap rates remain steady for high-quality assets, with limited lease roll over, and particularly those that are highly immunized and that can compete with new construction.

Finally, I would note that cap rates remained steady for high quality assets with limited lease rollover and particularly those that are highly monetized and that can compete with new construction.

While the investment sales market has improved, construction starts have slowed dramatically due to the uncertainty created by the pandemic. A positive for the continued office market recovery.

While the investment sales market has improved construction starts have slowed dramatically due to the uncertainty created by the pandemic are positive for the continued office market recovery.

With supply chain constraints, the construction of new product will now take two and a half to three years to be delivered. In addition, new construction costs are escalated by 15 to 20% versus pre-pandemic pricing. Driven by an increase in both raw materials and labor.

We supply chain constrains the construction of new product will now take two five to three years to be delivered in addition, new construction costs have escalated by 15% to 20% versus pre pandemic pricing driven by an increase in both raw materials and labor.

In this capital environment, Pee Mutt continues to focus on a redevelopment opportunities where cost and timelines can be more easily managed.

In this capital environment PMI continues to focus on our redevelopment opportunities where cost and timelines can be more easily managed.

In 2021, we completed over $50 million of incremental investment in our properties. Upgrading assets to remain best in class within their respective sub-mark.

In 2021, we completed over $50 million of incremental investment in our properties upgrading assets to remain best in class within their respective submarkets.

That said, we continue to have dialogue with a number of clients regarding pre-leasing for ground up development. Focusing on Peemont's investment activities, during the quarter we expanded our land on market footprint with the acquisition of 999 P-stree Street and subsequent to quarter in. I am pleased that we closed in a disposition of a race-yana asset as well as our accelerated our plan to exit from the Chicago market.

That said, we continue to have dialogue with a number of clients regarding pre leasing for ground up development.

<unk> on Piedmont investment activities during the quarter, we expanded our Atlanta market footprint with the acquisition of 999 Peachtree Street and subsequent to quarter end I am pleased that we closed on the disposition of a raytheon asset as well as our accelerated our planned exit from the Chicago market.

As you all know, the 999 acquisition marks our entry into Midtown Atlanta sub market. The iconic Class A lead platinum 28 story building, it's 622,000 square feet with 77% lease at acquisition.

As you all know the 999 acquisition marks our entry into Midtown Atlanta Submarket. The iconic class a LEED platinum 28 story building is 622000 square feet with 77% leased at acquisition.

We purchased it for $360 a square foot, which we estimated is over 40% below replacement cost.

We purchased it for $360 a square foot, which we estimate is over 40% below replacement cost.

We're working with Gensler, a tenant at the building, to complete the redesign of the 999s, arrival experience in public spaces, including a modernized and expanded lobby, energized outdoor space, and other enhanced to many which will complete over the next 12 to 18 months. And we'll revitalize this asset in a fraction of the time and cost of new construction.

We're working with Gensler, a tenant at the building.

To complete the redesign of 990 nine's arrival experience in public spaces, including a modernized and expanded lobby energized outdoor space and other enhanced many which will complete over the next 12 months to 18 months.

<unk> revitalized this asset in a fraction of the time and cost of new construction.

With a 10 foot glass window line across 70% of the facade, this asset will effectively compete against new construction at a fraction of the cost with an expected all-in basis in a low $400 per square foot. Versus new product consists of costing an excess of $650 per square foot. Creating substantial pricing leverage for our building when compared to that new development.

With a 10 foot glass window line across 70% of the facade. This asset will effectively compete against new construction at a fraction of the cost with an expected all in basis in the low $400 per square foot versus new product consistent costing in excess of $650 per square foot, creating substantial pricing leverage for our building when compared to that.

Development.

The 224 million dollar acquisition of $9.99 is being funded through multiple dispositions.

The $224 million acquisition of <unk> 99 is being funded through multiple dispositions.

Immediately after quarter in, the disposition of 225 and 235 presidential weigh in Boston closed in a reverse 1031 exchange for $129 million, or a mid-Fives cap rate.

Ideally after quarter in the disposition of $2 25, and $2 35 presidential way in Boston closed and a reverse 10 31 exchange for $129 million or a mid fives cap rate.

Off those subsequent to quarter end, we negotiated an agreement to sell and have closed on two peers' place, our last remaining asset in the Chicago area. And we anticipate more non-core asset proceeds in the first half of 2022.

Also subsequent to quarter end, we negotiated an agreement to sell and have closed on two Pierce place our last remaining asset in the Chicago area.

We would anticipate more noncore asset proceeds in the first half of 2022.

The acquisition of 999 Peach Tree Street during the fourth quarter, as well as the completion of two non-core dispositions just after the quarter in, now makes Atlanta our largest market based on annualized lease revenues.

The acquisition of 999 Peachtree Street during the fourth quarter as well as the completion of two noncore dispositions just after the quarter end now makes Atlanta, our largest market based on annualized lease revenue.

Adjusting our least percentage for the disposition transactions, our pro forma least percentage as of December 31st would have been 87%.

Adjusting our lease percentage for the disposition transactions, our pro forma lease percentage as of December 31 would have been 87%.

Additionally, approximately 63% of our annualized lease revenue is now generated from our Sunbelt Properties and our goal is to have 70 to 75% of our ALR generated by our Sunbelt markets before the end of 2023. We believe a goal that's attainable given the investment sales market activity we see today.

Additionally, approximately 63% of our annualized lease revenue is now generated from our some of our properties and our goal is to have 70% to 75% of our ALR generated by our sunbelt markets before the end of 2023, we believe a goal thats attainable given the investment sales market activity, we see today.

Finally, I want to thank those investors who attended the recent property to our December at our Midtown Atlanta and Galleria properties. My self and the team were extremely grateful to be able to share some of our most recent redevelopment projects.

Finally, I want to thank those investors who attended the recent property tour in December at our Midtown Atlanta and gallery of properties myself and the team were extremely grateful to be able to share some of our most recent redevelopment projects.

With that, I'll turn it over to Bobby to walk you through the financial highlights of the quarter and guidance for 2022. Bobby.

With that I'll turn it over to Bobby to walk you through the financial highlights of the quarter and guidance for 2020 to Bobby.

Bobby.

Thanks, Brent. While I'll discuss some of our financial highlights for the quarter, I encourage you to please review the entire earnings release and supplemental financial information, which were five last night, for more complete details.

Thanks, Brent while I'll discuss some of our financial highlights for the quarter.

Heard you to please review the entire earnings release, and supplemental financial information, which were filed last night for more complete details.

Looking back on 2021, Corapsofo for the year was $1.97 per diluted shear, a 4% increase over 2020, and an excess of the upper end of our original guidance range for the year.

Looking back on 2021 core <unk> for the year was $1 97 per diluted share a 4% increase over 2020 and in excess of the upper end of our original guidance range for the year.

This growth in Corapivo overcame an approximately 1% reduction in our overall lease percentage on a year-over-year base.

This growth in core <unk> overcame approximately 1% reduction in our overall lease percentage on a year over year basis.

The decrease in occupancy was driven by several factors, reduced leasing activity during 2020 in the first half of 2021 as a result of the pandemic.

The decrease in occupancy was driven by several factors reduced leasing activity during 2020 in the first half of 2021 as a result of the pandemic.

a number of sizable lease explorations that recently acquired properties in Atlanta and Dallas that were underwritten as part of their respective acquisition.

A number of sizable lease explorations at recently acquired properties in Atlanta, and Dallas that were underwritten as part of their respective acquisitions.

In the purchase of the 77% lease, 999 Peachtree Street Proper.

The purchase of the 77% leased.

Nine Peachtree Street property.

After incorporating the just completed disposition activity in January of 2022, our performance at least percentage as of December 31 would have been 87%.

After incorporating the just completed disposition activity in January of 2022, our pro forma lease percentage as of December 31 would have been 87%.

We reported 51 cents per diluted share of CoreFFO for the quarter.

We reported <unk> 51 per diluted share of core <unk> for the quarter.

That's an 11% increase over the fourth quarter of 2020.

That's an 11% increase over the fourth quarter of 2020.

This increase is primarily due to accretive recycling activity and rising rental rates.

This increase is primarily due to accretive recycling activity and rising rental rates are.

Our Cora Fafo achievement during the fourth quarter also reflects the repurchase of approximately 1 million shares of our common stock at an average price of $17.76 per share during the quarter. Leaving approximately 150 million in Board Authorized capacity under our share repurchase program.

<unk> achievements during the fourth quarter also reflects the repurchase of approximately 1 million shares of our common stock at an average price of $17 76.

Per share during the quarter, leaving approximately $150 million board authorized capacity under our share repurchase program.

Now CoreFFO, as you know, excludes gains, losses, impairments on real estate as well as, excluding depreciation and amortization. And I do want to discuss this real estate activity during the fourth quarter of 2021.

Now <unk> as you know excludes gains losses, and impairments on real estate as well as excluding depreciation and amortization.

And I do want to discuss this real estate activity during the fourth quarter of 2021.

While we had originally intended to lease up two pairs of place before this position.

While we had originally intended to lease up two pierce place before disposition.

We received an un-celicit offer to purchase the asset during the fourth quarter.

Received an unsolicited offer to purchase the asset during the fourth quarter.

given the fact that we have no other Chicago holdings we made the decision to accept it offer if the purchase could be negotiated and closed quickly thereafter

Given the fact that we have no other Chicago holdings, we made the decision to accept the offer.

<unk> could be negotiated and closed quickly thereafter.

as it's often the case, scalp typically disc dictates early recognition of potential loss.

As is often the case gap typically dictates early recognition of potential losses.

and the decisions that shorten the whole period for this asset did result in the recognition of a $41 million in paramount charge that is included in our fourth quarter results of operation.

And the decision to shorten the whole period for this asset did result in the recognition of a $41 million impairment charge that is included in our fourth quarter results of operations.

Now on the flip side, the sale of $2.25 to $35 presidential way will result in the recognition of an estimated $50 million dollar gain during the first quarter of 2022 when the sale won't cancel, but it will.

On the flip side the sale of $2 25 to 35 presidential way will result in the recognition of an estimated $50 million gain during the first quarter of 2022, when the sale closed.

AFFO generated during the fourth quarter was approximately $39 million, which is well above our current $26 million quarterly dividend level.

<unk> generated during the fourth quarter was approximately $39 million, which is well above our current $26 million quarterly dividend level.

Our board is indicated that given our cash in a wide growth over the last few years.

Our board has indicated that given our cash NOI growth over the last few years.

The fact that we're approaching the conclusion of the large construction restocking project for the state of New York at 60 broad.

The fact that we are approaching the conclusion of the large construction re stacking project for the state of New York at 60 broad.

The time since our last dividend increase, they will be reviewing our dividend payout amount during 2022.

And the time since our last dividend increase they will be reviewing our dividend payout amount during 2022.

Turning to the balance sheet, I expect more attention will be focused now on corporate financial positions given the rising interest rate environment, including the amount of floating rate debt, upcoming maturity.

Turning to the balance sheet I expect more attention will be focused now on corporate financial positions given the rising interest rate environment include.

Including the amount of floating rate debt.

Upcoming maturities and overall leverage.

Our annual debt, net debt to Cori Vidal ratio, as of the end of the fourth quarter of 2021, was 5.7 times.

Our annual debt net debt to core EBITDA ratio as of the end of the fourth quarter 2021 was five seven times and we reported $210 million of unused capacity on our line of credit.

and we reported 210 million of unused capacity on our line of credit.

Taking into consideration the completed disposition activity occurring right after your end.

Taking into consideration the completed disposition activity occurring right after year end.

With the net sales proceeds received in January , our current available capacity on our $500 million line of credit is approximately $320 million.

With the net sales proceeds received in January our.

Our current available capacity on our $500 million Atlanta credit is approximately $320 million.

with an approximate 120 million more expected later this quarter from the pay-off of another receiver.

With an approximate $120 million more expected later this quarter from the pay off of a note receivable.

Assessing.

for the application of proceeds from the two closed January sales.

For the application of proceeds from the two closed January sales.

Our performance debt growth asset ratio at year end would have been approximately 35%.

Our pro forma debt to gross asset ratio at year end would've been approximately 35% we.

We have no secured debt currently on our books, and we have no scheduled debt maturities in 2022, other than our revolver, which we currently intend to renew long term later this year, rather than exercise the line short-term extension of.

We have no secured debt currently on our books and we have no scheduled debt maturities in 2022 other than our revolver, which we currently intend to renew long term later this year rather than exercise aligns short term extension options.

Finally, we're introducing 2022 annual financial guidance for Core FFO in the range of $1.97 to $2.7 per diluted cheer.

Finally.

We're introducing 2022 annual financial guidance for core <unk> in the range of $1 97 to $2 seven per diluted share.

This guidance assumes that gradual increase in physical utilization of our buildings by our tenants over the course of the year to a level near pre-coated utilization by the end of the calendar year.

This guidance assumes a gradual increase in physical utilization of our buildings by our tenants over the course of the year to a level near pre COVID-19 utilization by the end of the calendar year.

It also assumes a neutral amount of acid recycling during the year with about 350 to 450 million each of acquisitions and additional dispositions.

It also assumes a neutral amount of asset recycling during the year with about $350 million to $450 million each of acquisitions and additional dispositions.

This net neutral activity excludes the recently completed fails of the presidential way assets.

This net neutral activity excludes the recently completed sales of the President's Hawaii assets.

and two Pierce Place property that were used to fund the 999 Peace Street Street acquisition.

And two Pierce place property that were used to fund the 999 Peachtree Street acquisition.

We will provide revised guidance as each significant acquisition or disposition is completed this year.

We will provide revised guidance as each significant acquisition or disposition is completed this year.

The guidance assumes general and administrative expenses in the range of $29 to $31 million for the year.

The guidance assumes general and administrative expenses in the range of $29 million to $31 million for the year.

Our same store cash in a lie growth is expected to be flat for the year with a number of abatements occurring during 2022 due to the lease renewals and newly commencing leases, such as 160,000 square foot renewal at 1155, perimeter center west in Atlanta, and a 56,000 least at 400 Virginia in Washington, DC.

Our same store cash NOI growth is expected to be flat for the year with a number of abatements occurring during 2022 due to the lease renewals and newly commencing leases such as the 160000 square foot renewal at $11 55 perimeter center West in Atlanta.

And a 56000 square foot lease at 400, Virginia and.

Washington D C.

as well as down times between leases associated with new tenant buildouts such as a 67,000 square foot lease at 5 and 15 wayside in Boston and a 44,000 square foot lease at one Lincoln in Dallas.

As well as downtime between leases associated with new tenant build outs, such as a 67000 square foot lease at five and 15 wayside in Boston and a 44000 square foot lease at one Lincoln in Dallas.

A cruel Bay store analyzed expected to grow from 1 to 3% during the year. I will remind you that these estimates will ultimately be dependent upon the transaction activity achieved during the year since such properties will be excluded at year end from the same store to your comparison.

Accrual based or NOI is expected to grow from 1% to 3% during the year.

I'll remind you that these estimates will ultimately be dependent upon the transactional activity achieved during the year since such properties will be excluded at year end from the same store two year comparisons.

Likewise, our least percentage is expected to grow to approximately 88%. But again, this estimate is subject to the least percentages of the properties involved with a 350 to 450 million potential recycling transactions completed during the year.

Likewise, our lease percentage is expected to grow to approximately 88%.

But again this estimate is subject to the lease percentages of the properties involved with a $350 million to $450 million of potential recycling transactions completed during the year.

Our forecast also assumes there will be three to four interest rate hikes during 2022 that will impact interest expense negatively versus recent prior years. And finally, we are assuming a dividend adjustment around mid-year and it is not expected to impact our overall financial results.

Our forecast also assumes there'll be three to four interest rate hikes during 2022 that will impact interest expense negatively versus <unk>.

Recent prior years.

Finally, we are assuming a dividend adjustment around midyear and it is not expected to impact our overall financial results.

With that, I'll now ask our conference call operator provide our listeners with instructions on how they can submit their questions. We'll attempt to answer all of your questions now, or we'll make appropriate later public disclosure if necessary. Operator?

With that I'll now ask our conference call operator to provide our listeners with instructions on how they can submit their questions. We'll attempt to answer all of your questions now.

We will make appropriate later public disclosure if necessary.

Operator.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.

If you have any questions or comments, please press star one on your phone at this

Ask that, while posing your question, you please pick up your handset. If listening on speaker phone to provide optimum sound quality, Please hold while we.

We ask that while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality.

Please hold while we poll for questions.

Okay.

Your first question for today is coming from Anthony Palon. Please announce your affiliation, then pose your question.

Your first question for today is coming from Anthony Powell loan. Please announce your affiliation then pose your question.

Thanks JP Morgan. Bobby I think I may just miss this because jotting some things down the loan investments. Did you say those were getting repaid or over the details on those?

Thanks, J P Morgan.

Bobby I think I may have just missed this because starting some things down the loan investments did you did you say those were getting repaid or would the details on this.

Hey Tony, I hope you're doing okay. You have a note receivable. We're expecting to be paid off based on discussions with them. You might remember that originated back last year with the SELF some properties in New Jersey, but we do expect it to be paid off in the first quarter.

Hey, Tony I Hope Youre doing okay, yes. The note receivable, we're expecting to be paid off based on discussions with them you might remember that originated back last year with the sale of some properties in New Jersey.

But we do expect it to be paid off in the first quarter.

I think got it. And then with regards to the capital recycling this year, you mentioned the neutral acquisitions and dispositions. It's not like that was from like a dollar volume point of view. Can you talk to spreads and what you think happens on that front?

Okay got it.

Then.

With regards to the capital recycling. This year you mentioned the neutral.

Acquisitions and dispositions it sounded like that was from like a dollar volume point of view can you talk to spreads and what you think happens on that front.

Hi Tony, it's Brent. Thanks for joining us this morning. In regards to spreads, I think it obviously depends on the opportunity that we're looking at and while there does seem to be either some good off-market dialogue that we're currently having or as I alluded to in my prepared remarks, an opportunity for some brokerage assets that we've been looking at for some time in our market.

Hi, Toni it's Brent Thanks for joining us this morning in regards to spreads I think.

It obviously depends on the opportunity that we're looking at and while there does seem to be either some good off market dialog that we're currently having are as I alluded to in my prepared remarks, a opportunity for some brokered assets that we've been looking at for some time in our markets.

primarily again Boston, Atlanta or Lando and Dallas.

Primarily again, Boston, Atlanta, Orlando and Dallas.

And so we continue to remain very enthusiastic about continuing to recycle. Historically, as you've mentioned or kind of alluded to, we've been able to do that creatively, probably to the tune of 150 basis points to 200 basis points. Some of it, some of it through value creation over a couple of years. An example of that being 999, where we're gonna do some pretty heavy lifting at the base of building the trivents meaningfully.

And so we continue to remain very enthusiastic about continuing to recycle.

Historically, you've mentioned or kind of alluded to we've been able to do that accretively probably to the tune of 150 basis points to 200 basis points. Some of the immediate some of it through value creation over call. It a few years.

An example of that being $9 99, where we're going to do some pretty heavy lifting at the base of the building, but driver. It's meaningfully so it's tough to give you a specific answer in terms of spreads because.

So it's tough to give you a specific answer in terms of spreads because we don't know what we'll buy. But I can say that what we kind of have in the hopper to sell is either being non-core, some of the more mature assets. And of course, you've heard me allude to Cambridge being a great opportunity or piggy bank.

Because we don't know what will buy but I can say that what we kind of have in the hopper to sell as either being noncore.

Some of the more mature assets and of course, you've heard me allude to Cambridge being a great opportunity or Piggy Bank I think we can continue to maintain accretion to what degree its hard to specifically say, but.

I think we can continue to maintain appreciation to what degrees are just specifically saved, but I think that trend is going to maintain itself given the quality of those assets that we have and or the long-term least nature of those assets that I mentioned that are in the disposition of.

I think that trend is going to maintain itself given the quality of those assets that we have and over the long term lease nature of those assets that I mentioned that are in the disposition hopper.

Okay, got it. And then you'd mention kind of where the sweet spot is in terms of working for high quality assets. I think you'd mention like seven year lease term, that sort of thing. How do you think about where your sweet spot is in terms of competing for these assets? And...

Okay got it and then do you.

You had mentioned kind of where the sweet spot is in terms of looking for high quality assets. I think you had mentioned like seven year lease term that sort of thing how do you think about where your sweet spot is in terms of competing for for these assets.

out competing competition, it seems like everybody's looking for fairly comparable staff.

Our computing the competition it seems like everybody is looking for fairly comparable staff.

You know, I think 99, 99 speaks to volumes of kind of the opportunity set. You know, our recent acquisitions, both the gallery asset.

I think 999 speaks to volumes.

The opportunity set.

Our recent acquisitions both of the Galleria assets.

right at the pandemic onset. Our good examples of historically what we've been able to find and create value with. Grace bones, older assets, but need a little TLC on the front house, particularly, but the back house has been well maintained, so we're not focused too much on mechanicals, et cetera. So we're obviously continuing to look for that. We recognize that some of our peers are purchasing just newly developed assets with long-term walls.

Right at the pandemic onset are good examples of historically, what we've been able to find and create value with.

Great phones older assets, but and even a little TLC on the front of house, particularly with the back of house has been well maintained so we're not focus too much on mechanicals et cetera. So we're obviously continuing to look for that we recognize that some of our peers are purchasing.

Newly developed assets with long term Walt.

that is at frankly very eye-popping, pricing in terms of per-pound valuation.

That is it frankly, very eye-popping pricing in terms of per pound valuations.

uh... we understand the i guess the perspective that those individuals are groups have but we've utilized our recycling and redevelopment dna to dry earnings growth more than the risk of ground up development that's not to say we wouldn't consider sorry uh... aquaquiring buildings that are recently ground up development uh... not to say that we wouldn't undertake that uh... to enter into a new market or specifically gain strong hold in it in a sub market

We understand the I guess, the perspective that Susan individuals or groups have but we've utilized our recycling and redevelopment DNA to drive earnings growth more than the risk of ground up development, that's not to say, we wouldn't consider I'm sorry.

Acquiring buildings that are recently ground up development not to say that we wouldnt undertake that to enter into a new market or specifically gained strong hold in a sub market, but I think we're more leaning towards finding those diamonds in the rough buying them at call. It a six cap are six five cap depending on the hair.

but I think we're more leaning towards finding those diamonds in the rough buying them and call it a six cap or six and a half cap depending on the hair and driving them to seven and a half plus. And I think all those that I mentioned in the beginning of this answer kind of qualify as that type.

And driving them to <unk>, seven five plus and I think all of those that I mentioned in the beginning of this answer kind of qualify as that type, but we're not I want to stress that we're not compromising on quality. When you talked about our sweet spot. There are a lot of companies who are willing to come into a market, but can't afford to pay.

uh... but we're not i want to stress that we're not compromising on quality we talk about our sweet spot there are a lot of companies who are willing to come into a market but can't afford to pay you know forty five fifty dollar net rents for new construction

A $45 $50 net rents for new construction, but they wanted a many ties high quality sustainability focused landlord and thats the sweet spot that we provide at a more affordable rate for that user group that isn't a technique five frankly.

but they want to miniatize high quality sustainability focus landlord and that's the sweet spot that we provide at a more uh... i guess affordable rate for that user group that isn't a uh... tech big five frankly you know that

Got it okay I appreciate all the color. Thank you.

Okay.

Your next question for today is coming from Dave Rogers. Please announce your affiliation. Then pose your question.

Your next question operator.

Your next question for today is coming from Dave Rodgers. Please announce your affiliation then pose your question.

Good morning everybody, Dave Rogers at Baird. I wanted to follow up on the asset sale discussion. Obviously you don't want to identify what you're looking at acquiring, but can you talk about what's in the market today? You talked about selling more during the first half of the year, so it's presumed that there's a number of assets in the market. Can you identify kind of what the targets are when you say non-core? Is that just Houston? Is that we're going back to DC? It sounds like Cambridge is on the shopping block as well, but can you give us more of a sense of what to expect on the sell side?

Good morning, everybody, Dave Rodgers of Baird I.

I wanted to follow up on the asset sale discussion, obviously, you don't want to identify what youre looking at acquiring but can you talk about what's in the market today, you talked about selling more during the first half of the year. So I presume that there is a number of assets in the market can you identify kind of what the targets are when you say non core is that just Houston is that we're going back to D. C. It sounds like came.

Bridges on the chopping block as well, but can you give us more of a sense of what to expect on the sell side.

Sure, I think you know, Dave, again, thank you for joining today. We look at this position as, you know, historically, we've paired our disposition very well with our acquisitions. I think, you know, $9.99 is a perfect example. We went under contract actually on the Raytheon asset in the middle of 21 and, you know,

Sure I think Dave again, thank you for joining today.

Look at dispositions as you know.

Historically, we paired our dispositions is very well with our acquisitions I think $9 99 is a perfect example, we went under contract actually on the Raytheon asset in the middle of 'twenty, one and.

to buy a structure so that we can opportunistically pair that with the buy. I think what's promising in this market is we're seeing more opportunities start to come to fruition. And so we get a bigger opportunity set, gives us the ability to weigh a little bit longer to dispose of the assets. So I don't have anything specifically in the market at the moment that we're looking to dispose of, but we do have dialogue every day with participants.

Device structure, so that we can opportunistically pair that with the bi I think what's promising in this market as we're seeing more opportunities start to come to fruition and so we get a more a bigger opportunities that gives us the ability to wait a little bit longer to dispose of the assets. So I don't have anything specifically in the market at the <unk>.

Moment that we're looking to dispose off but we do have dialogue every day with participants.

who we know we can move quickly and we'll say fair value if we needed to

Who we know we can move quickly and we will pay fair value, if we needed to and now in terms of the buys I think we're looking at.

and now in terms of the buys i think we're looking at uh... you know well we wanted to focus on this position so i think i'll leave it at that uh... so i think we have a good opportunity set again that is Houston in that non-core bucket it includes Cambridge i use the term chopping block i i don't know if i i would phrase it that but it is certainly

Well, we wanted to focus on disposition. So I think I'll leave it at that so I think we have a good opportunity set again that is Houston in that noncore bucket. It includes Cambridge I used the term chopping block I don't know if I would phrase it is that but it is certainly fully matured under our ownership. It's got about little over 10 years of term remaining with a major.

fully matured under our ownership. It's got about a little over 10 years of term remaining with a major tenant there being Harvard in both of those assets. And frankly, given what pricing is, they call it a four and a half.

Tenants are being Harvard and both of those assets.

And frankly, given where pricing is a call it a four and a half kind of $600 a foot for some assets in that market.

kind of $1,600 a foot for some assets in that market, we feel like it's a great opportunity to monetize that and rotate it into something it created.

We feel like it's a great opportunity to monetize that and rotated into something accretively.

I hope we, you know, and looking towards a 23-Event, I would say 60 broad would be a potential monetization opportunity set there as well.

And looking towards the 23 event I would say 60 bra it would be a potential monetization opportunity set there as well.

Maybe one for Bobby just in terms of the guidance since you're not including acquisitions and dispositions in the guidance this year. It's a fairly wide range from an operational perspective. What really kind of pushes you up and down in that range? Do you have any more? It looks like you kind of grabbed another million dollars or so from the gap deferrals previously and added that back in the quarter. Do you have more of those that get you to the top end and development?

Maybe one for Bob just in terms of the guidance since youre, not including acquisitions and dispositions in the guidance. This year, it's a fairly wide range from an operational perspective, what what really kind of pushes you up and down in that range do you have any.

More it looks like you've kind of grabbed another $1 million or so from the GAAP deferrals previously and added that back in the quarter do you have more of those that gets you to the top end and is the bottom and just.

kind of move out to the exploration terminations, maybe some guidance on that would be helpful.

Kind of move outs the exploration of the terminations, maybe some guidance on that would be helpful.

Well, obviously, when we release Dave, our guidance, the midpoint is typically the target we try to focus upon. I think over the last several years, absent of COVID, we've come in a little ahead on those. So hopefully we're conservative with our estimates.

Yes.

Well, obviously, when we release our guidance the midpoint is typically the target we try to focus upon I think over the last several years absent of Covid, we've come in a little ahead on those so hopefully we're conservative with our estimates.

I don't know how to respond to you. There are a number of factors that influence our actual learnings. It depends on our leasing activity that takes place. We try to make good long-term decisions there. It may result in down times as we try to bring investment-grade tenants, things like that that are not predictable as such. So leasing always is the key driver for us that influences what we achieve in a given year.

But I don't know how to respond to you in a number of factors that influence our actual earnings that depends on our leasing activity that takes place we try to make good long term decisions there and May result in down times.

We try to bring in investment grade tenants things like that that are not predictable as such so leasing always is the key driver for us that influences what we achieve in a given year.

I think I would add, Bobby, operationally, we are still in the midst of a pandemic. There are components of parking in the return to office, variable expenses that create some of that.

I would add Bobby operationally, we are still in the midst of the pandemic there are components of parking.

And the return to office variable expenses that create some of that.

You know, fluctuation and we've done our best to predict that, but frankly, nobody could have predicted, well, Delta. You know, once you saw Delta, maybe you could have predicted Omokron, but I think we're trying to be cognizant that there could be a Zeta or, you know, something else to that effect that could continue to delay, but realistically, we feel like 22 is moving in the right direction. And that's where the midpoint of the range would suggest.

Fluctuation and we've done our best to predict that but frankly, nobody could have predicted well delta. Once you saw delta maybe you could've predicted omicron, but I think we're trying to be cognizant that there could be data or something else to that effect that could continue to delay, but realistically. We feel like 20 twos is moving in the right direction and.

And Thats, where the midpoint of the range would suggest.

Last one for me, if I could. I guess I wanted to get your thoughts on two things. Obviously, continue to do the stock buyback in the quarter. I think your average buyback price going back to 2011 is above where the stock is today. You talked about increasing the dividend on the call in the middle still of a pandemic. You have an above average financial position relative, meaning more financial leverage than your peers. You know, a higher rollover schedule of massive tenants coming due. I guess why the hurry to deploy all this capital, especially after a quarter when concessions on leases were pretty tough?

Last one for me if I could.

I guess I wanted to get your thoughts on two things.

<unk> continued to do the stock buyback in the quarter I think your average buyback price going back to 2011 is above where the stock is today.

Talked about increasing the dividend on a call in the middle still of a pandemic you have an above average financial position relative meaning more financial leverage than your peers are higher rollover schedule of massive tenants coming due so I guess why why the hurry to deploy all of this capital, especially after a quarter when concessions on leases were.

And you got a lot coming at.

Pretty tough and you've got a lot coming at you.

but a lot in their day but it's let me take uh... uh... you know the quarter

Got it a lot in there Dave I guess first let me take.

The quarter.

Admittedly, the renewals were a little high, each one of those kind of three deals that we alluded to in our supplemental that were, unusually high TI'd have a reason behind that. Not even the specifics, but one involved, mainly moving around smaller tenants to get a large investment grade hidden into the space.

Admittedly the renewals were a little high each one of those kind of three.

Deals that we alluded to in our supplemental that we're.

Unusually high Ti has a reason behind that not to get into the specifics, but one involved mainly moving around smaller tenants to get a large investment grade tenant into the space.

And so we continue to do what's right by the real estate. And sometimes that does mean spending a little bit more for a tenant. And that's, since a few of those happen hitting the same quarter, that's why we always ask that our investors look at more of a rolling around.

And so we continue to do what's right by the real estate and sometimes that does mean spending a little bit more for a tenant in essence, a few of those have been hitting the same quarter and thats why we always.

As our investors look at more of a rolling 12 months and look at those trends and I think youll find on a rolling 12 months, we still are trending and kind of right in line with prior years premium and during Covid.

So I think our capital front, we don't feel like there's a wall of capital from our perspective, there's the regular way leasing and certainly we will admit that concessions have gone up on the Ti side and the pandemic, while free rent has dropped more dramatically.

that concessions have gone up on the TI side in the pandemic while free rent has dropped more dramatically. But we recognize that overall, I think our portfolio from a capital standpoint will stand against anybody else's and we don't have an unusual amount of draining needs in that regard. In terms of our debt profile, we've always stated we operate between 30 and 40% and it call it a sub-6 debt to EBITDA and I'm very focused on maintaining our credit rating and there is no concern with our rating agencies. We're both stable from both groups.

But we recognized that overall I think our portfolio from a capital standpoint will stand against anybody else's and we don't have an unusual amount of training needs in that regard in terms of our debt profile.

In terms of our depth profile, we've always stated we operate between 30% and 40% and it calls it a sub-6 debt to EBITDA and I'm very focused on maintaining our credit rating and there is no concern with our rating agencies who are both stable from both groups.

We've always stated we operate between 30% and 40%.

And I call. It a sub six debt to EBITDA and I'm very focused on maintaining our credit rating and there is no concern with our rating agencies were both stable from both groups.

And we feel like the balance sheet is well protected. Our line is currently, you know, has some drawn, but we've obviously alluded to. We do anticipate a paydown of the note from our bridge water properties. So that'll bring our line down into the call at several tens of millions. And we feel like that gives us the capacity to operate the business.

And we feel like the balance sheet is well protected our line is currently has some drawn but we've Bobby has alluded to we do anticipate a paydown of the note from our Bridgewater properties, So that will bring our line down.

Down into call. It several tens of millions and we feel like that gives us the capacity to operate the business as we feel is reasonable our peers, who are lower leveraged or more development focused in heavy than we are if we do get into the more of development, we would probably consider taking our leverage down a little bit into probably.

As we feel as reasonable, our peers who are lower leveraged are more development focused and heavy than we are. If we do get into the more of development, we would probably consider taking our leverage down a little bit into probably the low 30s.

The low thirties, but at the moment I feel like that's probably still a 'twenty three event put a shovel in the ground on our site, even though we are talking to some tenants realistically, it's going to take some time to get that so we view 2022 is a good opportunity to continue to rotate capital you did note we bought back shares.

But at the moment, I feel like that's probably still a 23 Event to put a shovel on the ground on our site even though we are talking to some tenants

realistically it's going to take some time to get that. So we view 2022 is a good opportunity to continue to rotate capital. You did note we bought back shares. We never view buying back shares as mutually exclusive from buying a rotating asset capital into assets.

We never view buying back shares is mutually exclusive from buying a rotating asset capital into assets and.

And frankly, we feel like at the time, when we purchase those shares, right when Omicon said in, and still believe we're an undervalued company, I think, but we trade above an eight cap, cap rate basis, if you use the green streets estimates of NOI, and we feel like we're certainly undervalued in that regard, and would buy back shares when we kind of fit the framework. And I've said before, that framework worked is generally when we trade at a meaningful discount to NAV, both on a relative and an absolute basis versus our peers. And when we're not leveraging up to do so, and that framework still holds today, and those shares were bought during that framework. And your reference to the buyback since 2011, understandably, I think our average buyback price is right around where we're trading today, and we continue to frankly focus more on assets today than stock.

And frankly, we feel like at the time, when we purchased the shares right.

<unk> and still believe we are an undervalued company I think what we traded above an eight cap on AR.

Cap rate basis, if you use take green streets estimates of NOI and we.

We feel like we're certainly undervalued in that regard and would buy back shares when we kind of fits the framework and I've said before that framework work is generally when we trade at a meaningful discount to NAV, both on a relative and an absolute basis versus our peers.

When we're not levering up to do so and that framework still holds today and those shares were bought during that framework and your reference to the buyback since 2011, understandably I think our average buyback price is readily right around where we're trading today.

And we continue to.

Thankfully focus more on assets today than stock.

Well, Brent, thanks for all the color and I appreciate your indulgence on the time.

Well, Brian Thanks for all the color and I appreciate your indulgence on the time.

Yes.

Thank you.

Your next question is coming from Michael Lewis. Please announce your affiliation, then pose your question. Great. This is Michael Lewis.

Your next question is coming from Michael Lewis. Please announce your affiliation then pose your question.

Great. Thanks. This is Mike Lewis had truest.

You know, this quarter it looked like you had more cat-x classified as incremental as opposed to non-incremental and therefore not fact out of the ASFO calculation.

This quarter. It looked like you had more capex classified as incremental as opposed to non incremental.

And therefore not back out of the <unk> calculation maybe.

Maybe that's related to some of the activity you already talked about. Can you just clarify what that 25 million of incremental cost was related to? And, you know, there's still a lot to spend and allocate to that bucket.

And maybe that's related to some of the activity you already talked about could you just clarify what that $25 million.

Incremental cost was related to.

Is there still a lot to spend.

Allocate to that bucket.

That was primarily related to some base building work at 60 broad in the redevelopment of that asset for the lower floors. There was a new race-pranked HVAC mechanical system and some additional components as well as just some of the regular way redevelopment of some of our properties.

That was primarily related to some base building work at 60 broad in the redevelopment of that asset for the lower floors. There was a new frankly, HVAC mechanical system and some additional components as well as just some of the regular way redevelopment of some of our properties I would not anticipate.

I would not anticipate that that would continue. Bobby.

The pace that that would continue.

Yeah, I was just going to comment, we do track with each of our leases, the incremental versus non-inclimental, what we're doing at buildings. We have outstanding projects, Leslan.

Bobby.

I was just going to comment we do track with each of our leases the incremental versus non incremental what we're doing at buildings, we have outstanding projects less than.

$15 million now on the incremental side. Now if we go buy something, start to do a lobby, enhance the building, that will add to that number. Okay. Okay. Thank you. And then just one more from me.

$15 million now on the incremental side now if we go buy something side to do a lobby enhance the building that will add to that number.

Okay. Thanks, and then just one more from me.

I know you get asked frequently about the CVS lease expiring at the end of the year.

I know you get asked frequently about the <unk>.

Cvs lease expiring at the end of the year.

And then next year, Ryan, Cargill, US Bank Corps, I think a previous question kind of alluded to these coming up.

And then next year, Ryan Cargill U S Bancorp.

I think a previous question you kind of alluded to these coming up I don't know if you talk about it frequently I think is there anything incremental to be aware of either changes and how you think about market rates or market rents versus in place or anything else to report on any of those.

I don't know if you talk about it frequently, I think. Is there anything incremental to be aware of either changes in how you think about market rates for market rents versus in place or anything else to report on any of those upcoming upgrades?

Aspirations.

Hi, Michael. It's Brent. Thanks for joining. You know, we do get asked about this expiration. I think as the prior question alluded to the number of potential expiration that we have in the next call at 24 months and why raise the dividend. I think the reason why we feel like we can raise the dividend is we feel generally pretty good about the leasing market and where that dialogue is with those tenants. So specifically with CVS, as we've noted before, we're well down a path and feel like that it's likely that they'll reduce the burden of the crisis. It's been noted in the press. Ryan has a site they've considered building on up in Frisco. Right now their expiration is late for the end of next year. Sorry, February of next year. Like these, they're going to have to do at least a short-term renewal because it's going to take some probably two and a half to three years if they could put a shovel in the ground tomorrow. And that is not currently underway. In terms of US bank and car gill, those of those are pretty far out still end of 23 and 24. So it's a little early, but I will say we're close to both groups and engaged. It's so pretty comfortable about where that stands. Although again, it is really early. But US bank has been headquartered in a stalwart corporation in Minneapolis and intends to continue to be there. And car gill, we can we feel pretty good about where the early dialogue is going. That's where it stands at the moment. But again, I think we feel pretty good about where all the leasing velocity is and our ability to then look forward and say the spread between AFFO and where our current dividend is. It is very meaningful. Call it $1.10 to $1.20 in terms of AFFO and a dividend of 84 cents. So our ability to raise that 5% or so is really modest relative to where the cash flow of the operating assets is.

Yes.

Hi, Michael it's Brad Thanks for joining.

We do get asked about this exploration I think as the prior question alluded to.

The number of potential explorations that we have in the next call. It 24 months and why raise the dividend I think the reason why we feel like we can raise the dividends we feel generally pretty good about the leasing market and where that dialogue is with those tenants.

So specifically with Cvs as we've noted before we are well down our path and feel like that it's likely that they'll renew on a majority of the space.

It's been noted in the press Ryan has a site they've considered going and building a building on up in Frisco.

Right now their exploration is slated for the end of next year, sorry February of next year.

And.

Likely they're going to have to do at least a short term renewal renewal because it's going to take them, probably 253 years. If they can put a shovel in the ground tomorrow and that is not currently underway in terms of U S Bank and Cargill, both of those are pretty far out still and a 23% and 24. So it's a little early but I will say, we're close with both groups and engaged.

And feel pretty comfortable about where that stands although again it is really early but U S Bank is.

<unk> headquartered in Stalwart Corporation in Minneapolis, and intends to continue to be there and cargo. We again, we feel pretty good about where the early dialogue has been so that's where it stands at the moment, but again I think we feel pretty good about where all the leasing velocity is and our ability to then look forward and say the spread between.

Queen.

<unk> and where our current dividend dividend is it is very meaningful call. It $1 10 to $1 20 in terms of <unk> and a dividend of <unk> 84, <unk>, so our ability to raise that 5% or so is really.

Modest relative to where the cash flow of the operating assets.

Perfect. Thank you for the update.

Perfect. Thank you for the update.

Once again, if there are any questions or comments, please press star one on your phone at this

Once again, if there are any questions or comments. Please press star one on your phone at this time.

Yes.

Your next question is coming from Daniel Ismail. Please announce your affiliation, then pose your question.

Your next question is coming from Daniel is now please announce your affiliation then pose your question.

Great, thank you, Dan and Smell from Green Street. Brence, you touched on this a few times during the call, but you mentioned the increased focus on amenities, the types of place in the office, as well as increased concessions and some more consent supply chain issues. Is it your sense that normalized a fax has moved higher for the sector or is this more of a point in time?

Great. Thank you Dana is now from Green Street.

You touched on this a few times during the call, but you mentioned the increased focus on amenities in place in the office.

As well as increased concessions in some markets and supply chain issues is it your sense that normalized.

<unk> has moved higher for the sector or was this more of a point in time, it's economic.

You're, I'm sorry, you kind of, you're treated off there a little bit of the end. I think you said, do we feel like where in this environment is a normalized capex environment for the sector?

Sorry.

Trade off there a little bit then I think you said do we feel like we're in this environment is a normalized capex environment for the sector.

No, I just apologize for a while. I was saying, do you think that CAPEX for the sector has just structurally moved higher over the last two years as a result of increased focus on amenities and perhaps a higher concessionary environment or are you anticipating that to reverse factory code?

I guess, sorry, if I <unk> I was saying.

Or do you think that Capex for the sector has just structurally moved higher over the last two years as a result of increased broker client amenities.

Perhaps a higher concessionary environment or are you anticipating that to reverse back to pre COVID-19 levels.

yeah i i think dandy i guess definitely would agree to currently it is definitely elevated i think it is partly due to you know the pandemic and people trying to take advantage of a softening in the marketplace uh... and frankly we've seen free rent still be very limited but p i capital uh... kind of rule the day because you have uh... frankly it's been a tenence market uh... and they've continued to not want to come out of pocket for a build out

Yes, I think Danny I guess definitely would agree to currently and is definitely elevated I think it is partly due to the pandemic and people trying to take advantage of a softening in the marketplace and frankly, we've seen free rent still be very limited, but ti capital.

Kind of a rule today because you have.

Frankly, it's been a tenants market.

And they've continued to not want to come out of pocket for build out.

In terms of the opportunity set of the amenities, et cetera, I think every building has an evolution and you need to evaluate when we buy buildings we do. When that kind of opportunity is to need to refresh and to be able to drive rent and drive velocity. So for a building, it kind of depends on where it is in its life cycle. We see some buildings that are older in nature but have been well maintained and ammetitized and they do very well in the marketplace.

Terms of the opportunity set of the amenities et cetera, I think every building hasnt evolution and you need to evaluate when we buy buildings, we do win that kind of opportunity is to need to refresh.

Drive rent and drive velocity, so for one building it kind of depends on where it is in its lifecycle.

We see some buildings that are older in nature, but have been well maintained and monetized and they do very well in the marketplace.

But we want to recognize that there are commodity products that we wouldn't make sense to invest in anymore and probably better and different use. Fortunately, our product isn't of that nature, but I do think you're gonna see just overall in this sector, which already was starting before the pandemic, that commodity obsolescence will continue to take hold, and as I alluded to in my prayer remarks, a disparity between kind of a quality assets and then most everything else.

We want to recognize that there are commodity product would make sense to invest in anymore and.

Better in different use fortunate and our product is of that nature, but I do think youre going to see just overall in this sector, which already was starting before the pandemic that commodity obsolescence will continue to take hold and as I alluded to in my prepared remarks, a disparity between kind of a quality assets and then most everything else and re <unk>.

and reinvesting in the A's are going to continue to help drive rent and just continue that disparity between uneminentized, commoditized products.

Investing in the as we're going to continue to help drive rent and you just continue that disparity between on a monetized commoditized product.

And so I think from our strategy, we think that wins itself well. It's definitely that flight to quality those itself towards our product versus

And so I think from our strategy, we think that lends itself well.

Definitely that flight to quality bodes itself towards our product versus.

the latter but i do think overall the sector that cat that profile has been elevated up uh... in terms of being able to fall back from the tenet side i think you're gonna see likely more drive and rate uh... then i've been a reduction in that capital it's still i think that most of my peers would probably agree you're looking at call it

The latter, but I do think overall the sector that capex profile has been elevated up and then in terms of being able to claw back from the tenant side, I think youre going to see likely more of driving rate.

And then a reduction in that capital is still I think most of my peers would probably agree you're looking at call. It.

$650 to $8 per square foot per year of term in terms of capital.

$6 50 to $8 per square foot per year of term in terms of capital.

Depending on them already thank you that's great.

And I believe the last time you provided the Pacific Europe portfolio rents were about 5% to 10% below markets.

Great. That's helpful. Thanks, and I believe the last time you provided guidance.

Back to your portfolio rents were about 5% to 10% below market if that's okay.

Yes, that is absolutely the case. I think as we've continued to show, again, on a rolling 12 months, I think, you know, quarter by quarter can be choppy, but on a rolling 12 months, we're right in that sweet spot between the five and 10, and I think that's very indicative of where the portfolio still stands. We've been pleased that we've held rate on a good bit of the portfolio, although net effectors are down in the single digits. And some of our markets and flat and others, almost now, in a versus pre-pandemic level. That's almost very probable.

Yes that is absolutely the case I think as we've continued to show again on a rolling 12 months I think quarter by quarter can be choppy, but on a rolling 12 months, we're right in that sweet spot between five and 10 and I think that's very indicative of where the portfolio is still stands we've been pleased that we've held rate on a good bit of the portfolio, although net effective theyre down in the <unk>.

<unk> digits, and some of our markets and flat and others almost now versus pre pandemic levels.

Great. Thanks, Brian .

There are no more questions in queue. I would now like to turn the floor back over to Brent Smith for any closing comments.

There are no more questions in queue I would now like to turn the floor back over to Brent Smith for any closing comments.

Thank you everyone for joining us today. My self and the team are really excited about 2022 and really continuing the growth and particularly the new leasing at three pandemic levels at the end of last year and to this year. You know, six percent of our leases expire this year and with 60 percent of our vacancy and 85 percent of our role in the Sunbelt, we really are enthused about the ability to continue to drive velocity and occupancy.

Thank you everyone for joining us today and myself and the team are really excited about 2022, and really continuing the growth and particularly the new leasing that pre pandemic levels at the end of last year into this year.

6% of our lease leases expire this year and with 60% of our vacancy at 85% of our role in the Sunbelt, we really are enthused about the ability to continue to drive velocity and occupancy.

We feel like we've got a best ESG platform and paired with our high quality, a miniatized assets, we'll continue to drive earnings growth. Thank you everyone for joining today.

We feel like we've got our best ESG platform and paired with our high quality a minute ties assets, we will continue to drive earnings growth.

Thank you everyone for joining today have a good day.

Thank you ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.